As filed with the Securities and Exchange Commission on April 30, 1997
    
                                                     File Nos. 2-57653; 811-2704

                       SECURITIES AND EXCHANGE COMMISSION

                             Washington, D.C. 20549

                                    Form N-1A



REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933          / X /
                                                                 
        Pre-Effective Amendment No. ___                          /___/

   
        Post-Effective Amendment No. 36                          / X /
    
                                                                 

                                     and/or

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY              
ACT OF 1940                                                      / X / 
                                                                 
   
        Amendment No. 28                                         / X /
    

                        (Check appropriate box or boxes)

                          PIONEER TAX-FREE INCOME FUND
               (Exact name of registrant as specified in charter)


                  60 State Street, Boston, Massachusetts 02109
                (Address of principal executive office) Zip Code


       Registrant's Telephone Number, including Area Code: (617) 742-7825

   
                  Joseph P. Barri, Hale and Dorr LLP, 60 State
                       Street, Boston, MA 02109 (Name and
                          address of agent for service)
    


It is proposed that this filing will become effective (check appropriate box):

   
             X  immediately upon filing pursuant to paragraph (b)
                on (date) pursuant to paragraph (b)
                60 days after filing pursuant to paragraph (a)
                on [date] pursuant to paragraph (a) of Rule 485

Registrant  has  registered  an  indefinite   amount  of  securities  under  the
Securities Act of 1933 pursuant to Section 24(f) of the  Investment  Company Act
of 1940. Registrant filed a Rule 24f-2 Notice for its fiscal year ended December
31, 1996 on or about February 28, 1997.
    


<PAGE>




                          PIONEER TAX-FREE INCOME FUND

            Cross-Reference Sheet Showing Location in Prospectus and
         Statement of Additional Information of Information Required by
                         Items of the Registration Form


                                                       Location in Prospectus
        Form N-1A Item Number                              or Statement of
             and Caption                               Additional Information
             -----------                               ----------------------

1.   Cover Page...................................     Prospectus - Cover Page

2.   Synopsis.....................................     Prospectus - Expense
                                                       Information

3.   Condensed Financial
        Information...............................     Prospectus - Financial
                                                       Highlights

4.   General Description of
        Registrant................................     Prospectus - Investment
                                                       Objective and Policies;
                                                       Management of the Fund

5.   Management of the Fund.......................     Prospectus - Management
                                                       of the Fund

6.   Capital Stock and Other
        Securities................................     Prospectus - Investment
                                                       Objective and Policies;
                                                       Fund Share Alternatives;
                                                       Share Price; Dividends,
                                                       Distributions and
                                                       Taxation

7.   Purchase of Securities
        Being Offered.............................     Prospectus - Distribution
                                                       Plans; How to Buy Fund
                                                       Shares

8.   Redemption or Repurchase.....................     Prospectus - How to Sell
                                                       Fund Shares; Shareholder
                                                       Services

9.   Pending Legal
        Proceedings...............................     Not Applicable

10.  Cover Page...................................     Statement of Additional
                                                       Information - Cover Page

11.  Table of Contents............................     Statement of Additional
                                                       Information - Cover Page

12.  General Information
        and History...............................     Statement of Additional
                                                       Information - Cover Page;
                                                       Management of the Fund;
                                                       Shares of the Fund
13.  Investment Objectives
        and Policy................................     Statement of Additional
                                                       Information - Investment
                                                       Objective and Policies;
                                                       Investment Restrictions

<PAGE>
                                                       Location in Prospectus
        Form N-1A Item Number                              or Statement of
             and Caption                               Additional Information
             -----------                               ----------------------

14.  Management of the Fund.......................     Statement of Additional
                                                       Information - Management
                                                       of the Fund; Investment
                                                       Adviser

15.  Control Persons and
        Principal Holders
        of Securities.............................     Statement of Additional
                                                       Information - Management
                                                       of the Fund

16.  Investment Advisory and
        Other Services............................     Statement of Additional
                                                       Information - Management
                                                       of the Fund; Investment
                                                       Adviser; Shareholder
                                                       Servicing/Transfer Agent;
                                                       Underwriting Agreement
                                                       and Distribution Plans;
                                                       Principal Underwriter;
                                                       Custodian; Independent
                                                       Public Accountant

17.  Brokerage Allocation and
        Other Practices...........................     Statement of Additional
                                                       Information - Portfolio
                                                       Transactions

18.  Capital Stock and Other
        Securities................................     Statement of Additional
                                                       Information - Shares of
                                                       the Fund

19.  Purchase, Redemption and
        Pricing of Securities
        Being Offered.............................     Statement of Additional
                                                       Information -
                                                       Determination of Net
                                                       Asset Value; Letter of
                                                       Intention; Systematic
                                                       Withdrawal Plan

20.  Tax Status...................................     Statement of Additional
                                                       Information - Tax Status
                                                       and Dividends

21.  Underwriters.................................     Statement of Additional
                                                       Information - Principal
                                                       Underwriter

22.  Calculation of Performance
        Data......................................     Statement of Additional
                                                       Information - Investment
                                                       Results

23.  Financial Statements.........................     Statement of Additional
                                                       Information - Financial
                                                       Statements



<PAGE>

Pioneer                                                     [Pioneer logo]
Tax-Free
Income
Fund

   
Class A, Class B and Class C Shares
Prospectus
April 30, 1997

      Pioneer Tax-Free Income Fund (the "Fund") seeks as high a level of income
exempt from regular federal income tax as possible, consistent with preservation
of capital. The Fund invests primarily in a diversified portfolio of tax-exempt
bonds.
    

      Fund returns and share prices fluctuate and the value of your account upon
redemption may be more or less than your purchase price. Shares in the Fund are
not deposits or obligations of, or guaranteed or endorsed by, any bank or other
depository institution, and the shares are not federally insured by the Federal
Deposit Insurance Corporation, the Federal Reserve Board or any other government
agency.

   
      This Prospectus provides information about the Fund that you should know
before investing. Please read and retain it for future reference. More
information about the Fund is included in the Statement of Additional
Information, dated April 30, 1997, which is incorporated by reference into this
Prospectus. A copy of the Statement of Additional Information may be obtained
free of charge by calling Shareholder Services at 1-800-225-6292 or by written
request to the Fund at 60 State Street, Boston, Massachusetts 02109. Other
information about the Fund has been filed with the Securities and Exchange
Commission (the "SEC") and is available upon request and without charge.

                              TABLE OF CONTENTS                        PAGE
          ---------------------------------------------------------   ------
I.         EXPENSE INFORMATION    .................................     2
II.        FINANCIAL HIGHLIGHTS   .................................     2
III.       INVESTMENT OBJECTIVE, POLICIES AND RISKS    ............     4
IV.        MANAGEMENT OF THE FUND    ..............................     6
V.         FUND SHARE ALTERNATIVES   ..............................     7
VI.        SHARE PRICE   ..........................................     8
VII.       HOW TO BUY FUND SHARES    ..............................     8
VIII.      HOW TO SELL FUND SHARES   ..............................    11
IX.        HOW TO EXCHANGE FUND SHARES  ...........................    13
X.         DISTRIBUTION PLANS  ....................................    13
XI.        DIVIDENDS, DISTRIBUTIONS AND TAXATION    ...............    14
XII.       SHAREHOLDER SERVICES   .................................    15
            Account and Confirmation Statements  ..................    15
            Additional Investments   ..............................    15
            Automatic Investment Plans  ...........................    15
            Financial Reports and Tax Information   ...............    15
            Distribution Options  .................................    15
            Directed Dividends    .................................    16
            Direct Deposit  .......................................    16
            Voluntary Tax Withholding   ...........................    16
            Telephone Transactions and Related Liabilities   ......    16
            FactFone(SM)    .......................................    16
            Telecommunications Device for the Deaf (TDD)  .........    16
            Systematic Withdrawal Plans    ........................    16
            Reinstatement Privilege (Class A shares only)    ......    16
XIII.      THE FUND   .............................................    17
XIV.       INVESTMENT RESULTS  ....................................    17
XV.        APPENDIX--TAXABLE EQUIVALENT YIELDS   ..................    19

                             --------------------

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
    

<PAGE>

I. EXPENSE INFORMATION

   
     This table is designed to help you understand the charges and expenses that
you, as a shareholder, will bear directly or indirectly when you invest in the
Fund. The table reflects annual operating expenses based on actual expenses
incurred for Class A and Class B shares for the fiscal year ended December 31,
1996. For Class C shares, operating expenses are based on expenses that would
have been incurred if Class C shares had been outstanding for the entire fiscal
year ended December 31, 1996.

                                        Class A    Class B   Class C
                                       ---------- ---------- ---------
Shareholder Transaction Expenses:
Maximum Initial Sales Charge on
 Purchases (as a percentage of
 offering price)    ..................    4.50%(1)    None       None
Maximum Sales Charge on
 Reinvestment of Dividends   .........    None        None       None
Maximum Deferred Sales Charge (as a
 percentage of purchase price or
 redemption proceeds, as applicable)      None(1)     4.00%      1.00%
Redemption Fee(2) ....................    None        None       None
Exchange Fee  ........................    None        None       None
Annual Operating Expenses
 (as a percentage of average net
 assets):
Management Fees  .....................    0.48%       0.48%      0.48%
12b-1 Fees    ........................    0.25%       1.00%      1.00%
Other Expenses (including accounting
 fees, transfer agent fees, custodian
 fees and printing expenses)    ......    0.17%       0.17%      0.21%
                                         -----        ------     ------
Total Operating Expenses:    .........    0.90%       1.65%      1.69%
                                         =====        ======     ======

---------

(1) Purchases of $1 million or more and purchases by participants in certain
    group plans are not subject to an initial sales charge but may be subject to
    a contingent deferred sales charge ("CDSC") as further described under "How
    to Sell Fund Shares."

    
(2) Separate fees (currently $10 and $20, respectively) apply to domestic and
    international wire transfers of redemption proceeds.

 Example:

   
     You would pay the following expenses on a $1,000 investment, assuming a 5%
annual return, reinvestment of all dividends and distributions and that the
percentage amounts listed under "Annual Operating Expenses" remain the same each
year.

                            1 Year    3 Years    5 Years   10 Years
                           --------- ---------- ---------- ----------
Class A Shares   .........    $54       $72        $ 93       $151
Class B Shares
--Assuming complete
  redemption at end
  of period ...............   $57       $82        $110       $175*
--Assuming no redemption      $17       $52        $ 90       $175*
Class C Shares**
--Assuming complete
  redemption at end
  of period ...............   $27       $53        $ 92       $200
--Assuming no redemption      $17       $53        $ 92       $200

---------

 *Class B shares convert to Class A shares eight years after purchase;
   therefore, Class A share expenses are used after year eight.

**Class C shares redeemed during the first year after purchase are subject to a
   1% CDSC.

     THE EXAMPLE IS DESIGNED FOR INFORMATION PURPOSES ONLY, AND SHOULD NOT BE
CONSIDERED A REPRESENTATION OF PAST OR FUTURE EXPENSES OR RETURNS. ACTUAL FUND
EXPENSES AND RETURNS WILL VARY FROM YEAR TO YEAR AND MAY BE HIGHER OR LOWER THAN
THOSE SHOWN.

     For further information regarding management fees, Rule 12b-1 fees and
other expenses of the Fund see "Management of the Fund," "Distribution Plans"
and "How To Buy Fund Shares" in this Prospectus and "Management of the Fund" and
"Underwriting Agreement and Distribution Plans" in the Statement of Additional
Information. The Fund's payment of a Rule 12b-1 fee may result in long-term
shareholders indirectly paying more than the economic equivalent of the maximum
sales charge permitted under the Conduct Rules of the National Association of
Securities Dealers, Inc. ("NASD").

    
     The maximum initial sales charge is reduced on purchases of specified
larger amounts of Class A shares and the value of shares owned in other Pioneer
mutual funds is taken into account in determining the applicable initial sales
charge. See "How to Buy Fund Shares." No sales charge is applied to exchanges of
shares of the Fund for shares of other publicly available Pioneer mutual funds.
See "How to Exchange Fund Shares."

II. FINANCIAL HIGHLIGHTS

   
     The following information has been audited by Arthur Andersen LLP,
independent public accountants. Arthur Andersen LLP's report on the Fund's
financial statements as of December 31, 1996 appears in the Fund's Annual Report
which is incorporated by reference into the Statement of Additional Information.
The information for the years from 1987 through 1993 has been derived from
financial statements which were audited by the Fund's then independent public
accountants, Coopers & Lybrand. The Annual Report includes more information
about the Fund's performance and is available free of charge by calling
Shareholder Services at 1-800-225-6292.
    

                                       2

<PAGE>

   
II. FINANCIAL HIGHLIGHTS (continued)

PIONEER TAX-FREE INCOME FUND
Selected Data For a Class A Share Outstanding Throughout Each Period:


                                       For the Year Ended December 31,
                                ----------------------------------------------
                                   1996        1995        1994      1993(a)
                                ----------- ----------- ----------- ----------
Net asset value, beginning of
 period   .....................    $ 12.36     $ 11.24     $ 12.68    $ 12.08
                                   --------    --------    --------   -------
Increase (decrease) from
 investment operations:
Net investment income (loss)       $  0.62     $  0.64     $  0.64    $  0.67
Net realized and unrealized
 gain (loss) on investments          (0.21)       1.21       (1.44)      0.87
                                   --------    --------    --------   -------
Net increase (decrease) from
 investment operations   ......    $  0.41     $  1.85     $ (0.80)   $  1.54
Distribution to shareholders:
 Net investment income   ......      (0.62)      (0.64)      (0.64)     (0.67)
 Net realized gain    .........      (0.19)      (0.09)      (0.00)     (0.27)
                                   --------    --------    --------   -------
Net increase (decrease) in
 net asset value   ............    $ (0.40)    $  1.12     $ (1.44)   $  0.60
                                   --------    --------    --------   -------
Net asset value, end of
 period   .....................    $ 11.96     $ 12.36     $ 11.24    $ 12.68
                                   ========    ========    ========   =======
Total return*   ...............       3.57%      16.84%      (6.38%)    12.98%
Ratio of net operating
 expenses to average
 net assets  ..................       0.92%+      0.91%+      0.91%      0.86%
Ratio of net investment
 income to average
 net assets  ..................       5.16%+      5.37%+      5.37%      5.37%
Portfolio turnover rate  ......         44%         35%         55%        58%
Net assets, end of period
 (in thousands)    ............   $441,733    $476,584    $452,661   $532,491
Ratios assuming reduction
 for fees paid indirectly:
 Net expenses   ...............       0.90%       0.89%         --         --
 Net investment income
  (loss)  .....................       5.18%       5.39%         --         --

<TABLE>
<CAPTION>
                                                  For the Year Ended December 31,
                                -------------------------------------------------------------------
                                  1992       1991       1990       1989       1988        1987
                                ---------- ---------- ---------- ---------- ---------- ------------
<S>                              <C>        <C>        <C>        <C>        <C>         <C>
Net asset value, beginning of
 period   .....................   $ 11.99    $ 11.52    $ 11.47    $ 11.17    $ 10.70     $ 11.69
                                  -------    -------    -------    -------    -------     ---------
Increase (decrease) from
 investment operations:
Net investment income (loss)      $  0.71    $  0.74    $  0.76    $  0.79    $  0.80     $  0.80
Net realized and unrealized
 gain (loss) on investments          0.31       0.65       0.06       0.31       0.47       (0.98)
                                  -------    -------    -------    -------    -------     ---------
Net increase (decrease) from
 investment operations   ......   $  1.02    $  1.39    $  0.82    $  1.10    $  1.27     $ (0.18)
Distribution to shareholders:
 Net investment income   ......     (0.71)     (0.74)     (0.76)     (0.80)     (0.80)      (0.81)
 Net realized gain    .........     (0.22)     (0.18)     (0.01)      0.00       0.00        0.00
                                  -------    -------    -------    -------    -------     ---------
Net increase (decrease) in
 net asset value   ............   $  0.09    $  0.47    $  0.05    $  0.30    $  0.47     $ (0.99)
                                  -------    -------    -------    -------    -------     ---------
Net asset value, end of
 period   .....................   $ 12.08    $ 11.99    $ 11.52    $ 11.47    $ 11.17     $ 10.70
                                  =======    =======    =======    =======    =======     =========
Total return*   ...............      8.73%     12.49%      7.40%     10.12%     12.25%      (1.56%)
Ratio of net operating
 expenses to average
 net assets  ..................      0.87%      0.87%      0.78%      0.63%      0.64%       0.63%
Ratio of net investment
 income to average
 net assets  ..................      5.80%      6.26%      6.69%      6.96%      7.26%       7.24%
Portfolio turnover rate  ......        62%        56%        40%        54%        73%         89%
Net assets, end of period
 (in thousands)    ............  $466,586   $408,990   $362,887   $357,388   $324,116    $307,266
Ratios assuming reduction
 for fees paid indirectly:
 Net expenses   ...............        --         --         --         --         --          --
 Net investment income
  (loss)  .....................        --         --         --         --         --          --
</TABLE>

Selected Data for a Class B Share Outstanding Throughout Each Period:

<TABLE>
<CAPTION>
                                                    For the Year Ended       April 28, 1995
                                                       December 31,                to
                                                           1996             December 31, 1995
<S>                                                      <C>                    <C>
Net asset value, beginning of period  ..............     $12.31                 $  11.81
                                                         --------               --------
Increase (decrease) from investment operations:
 Net investment income (loss)   ....................     $ 0.53                 $   0.35
 Net realized and unrealized gain (loss)
    on investments    ..............................      (0.22)                    0.58
                                                         --------               --------
Net increase (decrease) from
    investment operations   ........................     $ 0.31                 $   0.93
Distribution to shareholders:
 Net investment income    ..........................      (0.53)                   (0.34)
 In excess of net investment income   ..............      (0.02)                      --
 Net realized gain  ................................      (0.19)                   (0.09)
                                                         --------               --------
Net increase (decrease) in net asset value  ........     $(0.43)                $   0.50
                                                         --------               --------
Net asset value, end of period  ....................     $11.88                 $  12.31
                                                         ========               ========
Total return*    ...................................       2.66%                    7.94%
Ratio of net expenses to average net assets    .....       1.67%+                   1.72%**+
Ratio of net investment income (loss)
to average net assets ..............................       4.38%+                   4.38%**+
Portfolio turnover rate   ..........................         44%                      35%
Net assets, end of period (in thousands)    ........     $4,792                 $  2,069
Ratios assuming reduction for fees paid indirectly:
 Net expenses    ...................................       1.65%                    1.65%**
 Net investment income (loss)   ....................       4.40%                    4.45%**
</TABLE>


---------

(a) Prior to assumption of the management agreement on December 1, 1993 by
    Pioneering Management Corporation, the Fund was advised by Mutual of Omaha
    Fund Management Company.

  * Assumes initial investment at net asset value at the beginning of each
    period, reinvestment of distributions, the complete redemption of the
    investment at net asset value at the end of each period and no sales charge.
    Total return would be reduced if sale charges were taken into account.

 ** Annualized.

  + Ratio assuming no reduction for fees paid indirectly.
    

                                       3

<PAGE>

   
II. FINANCIAL HIGHLIGHTS (continued)

Selected Data for a Class C Share Outstanding Throughout Each Period(a):

                                                         For the period
                                                       January 31, 1996
                                                    through December 31, 1996
Net asset value, beginning of period  ............         $12.32
                                                           ------
Increase (decrease) from investment operations:
 Net investment income (loss)   ..................         $ 0.49
 Net realized and unrealized gain (loss)
    on investments    ............................          (0.24)
                                                           ------
Net increase (decrease) from
    investment operations   ......................         $ 0.25
Distribution to shareholders:
 Net investment income    ........................          (0.49)
 In excess of net investment income   ............          (0.01)
 Net realized gain  ..............................          (0.19)
                                                           ------
Net increase (decrease) in net asset value  ......         $(0.44)
                                                           ------
Net asset value, end of period  ..................         $11.88
                                                           ======
Total return*    .................................           2.19%
Ratio of net expenses to average net assets    ...           1.71%**+
Ratio of net investment income (loss)
    to average net assets ........................           4.34%**+
Portfolio turnover rate   ........................             44%
Net assets, end of period (in thousands)    ......         $  383
Ratios assuming reduction for fees
    paid indirectly:
 Net expenses    .................................           1.69%**
 Net investment income (loss)   ..................           4.36%**
---------

(a) Class C shares were first publicly offered on January 31, 1996.

  * Assumes initial investment at net asset value at the beginning of each
    period, reinvestment of distributions, the complete redemption of the
    investment at net asset value at the end of each period and no sales charge.
    Total return would be reduced if sale charges were taken into account.

 ** Annualized.

  + Ratio assuming no reduction for fees paid indirectly.

--------------------------------------------------------------------

III. INVESTMENT OBJECTIVE, POLICIES AND RISKS

     The investment objective of the Fund is to seek as high a level of income
exempt from regular federal income tax as possible, consistent with preservation
of capital. To achieve this objective, the Fund invests in a diversified
portfolio of obligations issued by or on behalf of states, counties and
municipalities of the United States ("U.S.") and their authorities and political
subdivisions ("Tax-Exempt Bonds"), the interest on which is excluded from gross
income for federal income tax purposes, in the opinion of counsel to the issuer
of the bond. The Fund's portfolio will primarily consist of Tax-Exempt Bonds
rated at the time of purchase within the three highest grades assigned by
Moody's Investors Services, Inc. ("Moody's") (Aaa, Aa or A) or Standard & Poor's
Ratings Group ("S&P") (AAA, AA or A). Securities in which the Fund invests may
not yield as high a level of current income on a pre-tax basis as securities
subject to regular federal income tax or securities of lower quality which
generally are less liquid and have greater market risk and price fluctuation.

     The Fund may also invest in temporary investments consisting of: (1) notes
issued by or on behalf of municipal issuers backed by the U.S. government; (2)
notes of issuers having, at the time of purchase, an issue of outstanding Tax-
Exempt Bonds rated within the three highest grades of the rating services as
described above; (3) securities of other investment companies*; (4) obligations
of the U.S. government, its agencies or instrumentalities*; (5) commercial paper
rated in the highest grade by either of such rating services (Prime-I or A-I,
respectively)*; (6) bank instruments (including certificates of deposit, time
deposits and bankers' acceptances) of domestic or foreign banks with assets of
$1 billion or more*; and (7) repurchase agreements on such securities* with
banks or broker-dealers. During periods of normal market conditions, the Fund
will have at least 80% of its net assets invested in Tax-Exempt Bonds, with up
to 20% of the Fund's assets in temporary investments or cash. When the
investment adviser believes that market conditions dictate a defensive posture,
a greater percentage of the Fund's assets may be invested in temporary
investments. The asterisk (*) indicates that the income from these securities
is or may be subject to federal income tax.

    
     The Fund may invest more than 25% of its total assets in securities,
payments on which are derived from funds provided by companies in the gas,
electric, telephone, sewer and water, public and private utility segments of the
municipal bond market. The Fund will not purchase securities if, as a result of
such transaction, more than 25% of its total assets would be invested in any one
industry. For purposes of this limitation, Tax-Exempt Bonds, except those issued
for the benefit of non-governmental users, are not considered to be part of an
industry. The Fund may invest 25% or more of its total assets in Tax-Exempt
Bonds of issuers in any one state and may invest 25% or more of its total assets
in industrial development bonds.

Investment Company Securities

     The Fund may invest up to 10% of the value of its total assets in
securities of other investment companies, with up to 5% of the value of the
Fund's total assets invested in securities of any one investment company, but
may not own more than 3% of the outstanding voting securities of any one
investment company. Because investments in other investment companies involve
expenses being incurred by those

                                       4

<PAGE>

companies as well as comparable expenses being incurred by the Fund, investments
in other investment companies will generally be used only for short-term
investing and only when the Fund reasonably anticipates that the net return to
the Fund's shareholders will be advantageous, as compared to available
alternatives, while maintaining the appropriate level of liquidity. It is
expected that most of such investments will be in no-load, tax-free money market
funds that invest, as far as practicable, in the same quality of investments as
the Fund may invest in directly.

Options

     The Fund may write (sell) "covered" put and call options on fixed-income
securities. Call options are "covered" by the Fund when it owns the underlying
securities, or owns securities convertible into or carrying rights to acquire
such securities without payment of additional consideration, which the option
holder has the right to purchase, and put options are "covered" by the Fund when
it has established a segregated account of cash or liquid, high-grade debt
obligations sufficient to satisfy the Fund's obligation to purchase the
underlying securities. The Fund receives a premium from writing a put or call
option, which increases the Fund's gross income in the event the option expires
unexercised or is closed out at a profit. By writing a call option, the Fund
limits its opportunity to profit from any increase in the market value of the
underlying security above the exercise price of the option. By writing a put
option, the Fund assumes the risk that it may be required to purchase the
underlying security for an exercise price higher than its then current market
value, resulting in a capital loss unless the security subsequently appreciates
in value.

     The Fund intends to write and purchase options on securities primarily for
hedging purposes and also in an effort to increase current income. Distributions
to shareholders of any gains from options transactions will be taxable. Options
on securities that are written or purchased by the Fund will be entered into on
U.S. exchanges and in the over-the-counter market. Over-the-counter transactions
involve certain risks which may not be present in a transaction on an exchange.
The staff of the SEC has taken the position that over-the-counter options and
assets used to cover over-the-counter options are illiquid and, therefore,
together with other illiquid securities, cannot exceed 15% of the Fund's net
assets.

     The writing and purchase of options is a highly specialized activity which
involves investment techniques and risks different from those associated with
ordinary portfolio securities transactions. The successful use of options for
hedging purposes depends in part on the investment adviser's ability to predict
future price fluctuations and the degree of correlation between the options and
securities markets. If the investment adviser is incorrect in its determination
of the correlation between the securities or indices on which the options are
written and purchased and the securities in the Fund's investment portfolio, the
investment performance of the Fund will be less favorable than it would have
been in the absence of such option transactions. The Fund pays brokerage
commissions or spreads in connection with its options transactions. The writing
of options could significantly increase the Fund's portfolio turnover rate.

Futures Contracts and Options on Futures Contracts

     To hedge against changes in interest rates and securities prices or for
non-hedging purposes, the Fund may purchase and sell futures contracts on fixed
income securities or indices composed of such securities, including municipal
bonds and U.S. Treasury securities, and purchase and write call and put options
on such futures contracts. The Fund may also enter into closing purchase and
sale transactions with respect to any of such contracts and options. The futures
contracts may be based on various securities (such as U.S. government
securities), securities indices and other financial instruments and indices. The
Fund will engage in futures and related options transactions only for bona fide
hedging purposes as defined in regulations of the Commodities Futures Trading
Commission or for non-hedging, speculative purposes to the extent permitted by
such regulations.

     The Fund may not purchase or sell futures contracts or purchase or sell
related options for non-hedging purposes, except for closing purchase or sale
transactions, if immediately thereafter the sum of the amount of initial margins
and premiums on the Fund's outstanding non-hedging positions in futures and
related options would exceed 5% of the market value of the Fund's net assets.
Transactions in futures contracts and options on futures involve brokerage
costs, require margin deposits and, in the case of contracts and options
obligating it to purchase securities, require the Fund to segregate assets with
a value equal to the amount of the Fund's obligations. The Fund will not enter
into option transactions or futures contracts or options thereon if immediately
thereafter more than 35% of the market value of the Fund's net assets would be
represented by such instruments.

     While transactions in futures contracts and options on futures may reduce
certain risks, such transactions themselves entail certain other risks. Thus,
while the Fund may benefit from the use of futures and options on futures,
unanticipated changes in interest rates or securities prices may result in a
poorer overall performance for the Fund than if it had not entered into any
futures contracts or options transactions. The loss incurred by the Fund in
writing options on futures is potentially unlimited and may exceed the amount of
the premium received. In the event of an imperfect correlation between a futures
position and a portfolio position which is intended to be protected, the desired
protection may not be obtained and the Fund may be exposed to risk of loss.
Perfect correlation between the Fund's futures positions and portfolio positions
may be impossible to achieve. The Fund's transactions in options and futures
contracts may be limited by the requirements of the Internal Revenue Code of
1986, as amended (the "Code"), for qualification as a regulated investment
company, and distributions to shareholders of any gains from such transactions
will be taxable.

Other Information

     The yields and market values of municipal securities are determined
primarily by the general level of interest rates, the creditworthiness of the
issuers of municipal securities and economic and political conditions affecting
such issuers. Due to their tax exempt status, the yields and market prices of
municipal securities may be adversely affected by changes in

                                       5

<PAGE>

tax rates and policies, which may have less effect on the market for taxable
fixed income securities. Moreover, certain types of municipal securities, such
as housing revenue bonds, involve prepayment risks which could affect the yield
on such securities.

     Investments in municipal securities are subject to the risk that the issuer
could default on its obligations. Such a default could result from the
inadequacy of the sources or revenues from which interest and principal payments
are to be made or the assets collateralizing such obligations. Revenue bonds,
including private activity bonds, are backed only by specific assets or revenue
sources and not by the full faith and credit of the governmental issuer.

     The Fund will limit portfolio turnover to the extent practicable and
consistent with its investment objective and policies. While it does not intend
to engage in short-term trading, the Fund is not precluded from taking advantage
of short-term trends and yield disparities that might occur from time to time. A
higher portfolio turnover rate (over 100%) may result in correspondingly higher
transaction costs and may increase the realization of net short-term capital
gains, distributions of which are taxable to shareholders as ordinary income.
See "Financial Highlights" for actual rates.

When Issued Securities

     The Fund may also purchase and sell securities on a "when issued" and
"delayed delivery" basis. These transactions are subject to market fluctuation;
the value at the time of delivery may be more or less than the purchase price.
Since the Fund will rely on the buyer or seller, as the case may be, to
consummate the transaction, failure by the other party to complete the
transaction may result in the Fund missing the opportunity of obtaining a price
or yield considered to be advantageous. No interest accrues to the Fund prior to
delivery. When the Fund is the buyer in such a transaction, however, it will
maintain, in a segregated account with its custodian, cash, U.S. government
securities, or high-grade, liquid debt obligations having an aggregate value
equal to the amount of such purchase commitments until payment is made. The Fund
will make commitments to purchase securities on such basis only with the
intention of actually acquiring these securities, but the Fund may sell such
securities prior to the settlement date if such sales are considered to be
advisable. To the extent the Fund engages in "when issued" and "delayed
delivery" transactions, it will do so for the purpose of acquiring securities
for the Fund's portfolio consistent with the Fund's investment objective and
policies and not for the purpose of investment leverage.

Repurchase Agreements

     A repurchase agreement is an instrument under which the purchaser acquires
ownership of the obligation but the seller agrees, at the time of sale, to
repurchase the obligation at a mutually agreed upon time and price. The resale
price is in excess of the purchase price and reflects an agreed upon market rate
unrelated to the coupon rate on the purchased security. Such transactions afford
an opportunity for the Fund to invest temporarily available cash. In the event
of the insolvency of the seller, or an order to stay execution of an agreement
by a court or regulatory authority, the Fund could incur costs before being able
to sell the underlying obligations and the Fund's realization of the underlying
obligations could be delayed or limited, which could adversely affect the price
the Fund receives for such obligations. There is also a risk that the seller may
fail to repurchase the underlying obligations in which case the Fund may incur
possible disposition costs and a loss if the proceeds of the sale of such
obligations to a third party are less than the repurchase price. To guard
against these possibilities, the investment adviser, under guidelines
established by the Fund's Board of Trustees, will evaluate the creditworthiness
of the seller. The Fund will enter into repurchase agreements only with those
institutions that the investment adviser believes present minimal credit risks
and which furnish collateral at least equal in value or market price to the
amount of the repurchase obligations. Repurchase agreements maturing in more
than seven days are considered by the Fund to be illiquid. Distributions to
shareholders of income from repurchase agreements are taxable.

Risk Factors

     Because prices of securities fluctuate from day to day, the value of an
investment in the Fund will vary based upon the Fund's investment performance.
The value of your shares in the Fund may, at any time, be higher or lower than
your original cost. The Fund may invest in debt securities with varying
maturities. In general, the longer the maturity of a security, the higher the
yield and the greater the potential for price fluctuations. A decline in
interest rates generally produces an increase in the value of debt securities in
the Fund's portfolio, while an increase in interest rates usually reduces the
value of these securities.

Additional Restrictions

     In addition to the investment objective and policies discussed above, the
Fund's investments are subject to other restrictions which are described in its
Statement of Additional Information. Unless otherwise stated, the Fund's
investment objective and restrictions are considered fundamental and cannot be
changed without shareholder approval. Unless expressly designated as a
fundamental policy, the Fund's investment policies may be changed without
shareholder approval by the Board of Trustees of the Fund.

IV. MANAGEMENT OF THE FUND

     The Board of Trustees of the Fund has overall responsibility for management
and supervision of the Fund. There are currently eight Trustees, six of whom are
not "interested persons" of the Fund as defined in the Investment Company Act of
1940 (the "1940 Act"). The Board meets at least quarterly. By virtue of the
functions performed by Pioneering Management Corporation ("PMC") as investment
adviser, the Fund requires no employees other than its executive officers, all
of whom receive their compensation from PMC or other sources. The Statement of
Additional Information contains the names of and general background information
regarding each Trustee and executive officer of the Fund.

   
     Mr. David Tripple, President and Chief Investment Officer of PMC and
Executive Vice President of each Pioneer mutual fund, has general responsibility
for PMC's investment opera-

                                       6

<PAGE>

tions and chairs a committee of PMC's fixed income managers which reviews PMC's
research and portfolio operations, including those of the Fund. Mr. Tripple
joined PMC in 1974.

     Research and management for the Fund is the responsibility of a team of
portfolio managers and analysts focusing on fixed income securities. Members of
the team meet regularly to discuss holdings, prospective investments and
portfolio composition. Mr. Sherman Russ, a Senior Vice President of PMC, is the
senior member of the fixed income team. Mr. Russ joined PMC in 1983.

     Day-to-day management of the Fund has been the responsibility of Mr. Mark
Winter, Vice President of the Fund and PMC. Mr. Winter assumed responsibility of
the Fund in March 1986 when it was managed by Mutual of Omaha Fund Management
Company ("FMC"). Mr. Winter joined PMC in 1993 and has over ten years of
investment experience.
    

     The Fund is managed under a contract with PMC. PMC serves as investment
adviser to the Fund and is responsible for the overall management of the Fund's
business affairs, subject only to the authority of the Fund's Board of Trustees.
PMC is a wholly owned subsidiary of The Pioneer Group, Inc. ("PGI"), a Delaware
corporation. Pioneer Funds Distributor, Inc. ("PFD"), an indirect wholly-owned
subsidiary of PGI, is the principal underwriter of shares of the Fund. Prior to
December 1, 1993, FMC acted as investment adviser and principal underwriter to
the Fund.

   
     In addition to the Fund, PMC also manages and serves as the investment
adviser for other mutual funds and is an investment adviser to certain other
institutional accounts. PMC's and PFD's executive offices are located at 60
State Street, Boston, Massachusetts 02109. In an effort to avoid conflicts of
interest with the Fund, the Fund and PMC have adopted a Code of Ethics that is
designed to maintain a high standard of personal conduct by directing that all
personnel defer to the interests of the Fund and its shareholders in making
personal securities transactions.

     Under the terms of its contract with the Fund, PMC provides the Fund with
an investment program consistent with its investment objective and policies. PMC
furnishes the Fund with office space, equipment and personnel for managing the
affairs of the Fund. PMC also pays all expenses in connection with the
management of the affairs of the Fund except (i) charges and expenses for fund
accounting, pricing and appraisal services and related overhead, including, to
the extent such services are performed by personnel of PMC or its affiliates,
office space and facilities and personnel compensation, training and benefits;
(ii) the charges and expenses of auditors; (iii) the charges and expenses of any
custodian, transfer agent, plan agent, dividend disbursing agent and registrar
appointed by the Fund; (iv) issue and transfer taxes, chargeable to the Fund in
connection with securities transactions to which the Fund is a party; (v)
insurance premiums, interest charges, dues and fees for membership in trade
associations and all taxes and corporate fees payable by the Fund to federal,
state or other governmental agencies; (vi) fees and expenses involved in
registering and maintaining registrations of the Fund and/or its shares with
regulatory agencies, state or blue sky securities agencies and foreign
countries, including the preparation of Prospectuses and Statements of
Additional Information for filing with regulatory agencies; (vii) all expenses
of shareholders' and Trustees' meetings and of preparing, printing and
distributing prospectuses, notices, proxy statements and all reports to
shareholders and to governmental agencies; (viii) charges and expenses of legal
counsel to the Fund and the Trustees; (ix) distribution fees paid by the Fund in
accordance with Rule 12b-1 promulgated by the SEC pursuant to the 1940 Act; (x)
compensation of those Trustees of the Fund who are not affiliated with or
interested persons of PMC, the Fund (other than as Trustees), PGI or PFD; (xi)
the cost of preparing and printing share certificates; and (xii) interest on
borrowed money, if any. In addition to the expenses described above, the Fund
shall pay all brokers' and underwriting commissions chargeable to the Fund in
connection with securities transactions to which the Fund is a party.

     Orders for the Fund's portfolio securities transactions are placed by PMC,
which strives to obtain the best price and execution for each transaction. In
circumstances where two or more broker-dealers are in a position to offer
comparable prices and execution, consideration may be given to whether the
broker-dealer provides investment research or brokerage services or sells shares
of the Fund or other Pioneer mutual funds for which PMC or any of its affiliates
serves as investment adviser or manager. See the Statement of Additional
Information for a further description of PMC's brokerage allocation practices.
    

     As compensation for its management services for the Fund and certain
expenses which PMC incurs, PMC is entitled to a management fee from the Fund at
the annual rates set forth below as a percentage of average daily net assets:

                     Net Assets                           Annual Fee
------------------------------------------------------   ------------
For assets up to $250,000,000                             .50%
For assets in excess of $250,000,000 to $300,000,000      .48%
Over $300,000,000                                         .45%

   
     See "Expense Information" in this Prospectus and "Investment Adviser" in
the Statement of Additional Information.

     John F. Cogan, Jr., Chairman and President of the Fund, Chairman of PFD,
President and a Director of PGI and Chairman and a Director of PMC, owned
approximately 14% of the outstanding capital stock of PGI as of the date of this
Prospectus.
    

V. FUND SHARE ALTERNATIVES

     The Fund continuously offers three Classes of shares designated as Class A,
Class B and Class C shares, as described more fully in "How to Buy Fund Shares."
If you do not specify in your instructions to the Fund which Class of shares you
wish to purchase, exchange or redeem, the Fund will assume that your
instructions apply to Class A shares.

     Class A Shares. If you invest less than $1 million in Class A shares, you
will pay an initial sales charge. Certain purchases may qualify for reduced
initial sales charges. If you invest $1 million or more in Class A shares, no
sales charge will be imposed at the time of purchase, however, shares

                                       7

<PAGE>

redeemed within 12 months of purchase may be subject to a CDSC. Class A shares
are subject to distribution and service fees at a combined annual rate of up to
0.25% of the Fund's average daily net assets attributable to Class A shares.

   
     Class B Shares. If you plan to invest up to $250,000, Class B shares are
available to you. Class B shares are sold without an initial sales charge, but
are subject to a CDSC of up to 4% if redeemed within six years. Class B shares
are subject to distribution and service fees at a combined annual rate of 1% of
the Fund's average daily net assets attributable to Class B shares. Your entire
investment in Class B shares is available to work for you from the time you make
your investment, but the higher distribution fee paid by Class B shares will
cause your Class B shares (until conversion) to have a higher expense ratio and
to pay lower dividends, to the extent dividends are paid, than Class A shares.
Class B shares will automatically convert to Class A shares, based on relative
net asset value, eight years after the initial purchase.

     Class C Shares. Class C shares are sold without an initial sales charge,
but are subject to a 1% CDSC if they are redeemed within the first year after
purchase. Class C shares are subject to distribution and service fees at a
combined annual rate of up to 1% of the Fund's average daily net assets
attributable to Class C shares. Your entire investment in Class C shares is
available to work for you from the time you make your investment, but the higher
distribution fee paid by Class C shares will cause your Class C shares to have a
higher expense ratio and to pay lower dividends, to the extent dividends are
paid, than Class A shares. Class C shares have no conversion feature.

     Selecting a Class of Shares. The decision as to which Class to purchase
depends on the amount you invest, the intended length of the investment and your
personal situation. If you are making an investment that qualifies for reduced
sales charges, you might consider Class A shares. If you prefer not to pay an
initial sales charge on an investment of $250,000 or less and you plan to hold
the investment for at least six years, you might consider Class B shares. If you
prefer not to pay an initial sales charge and you plan to hold your investment
for one to eight years, you may prefer Class C shares.
    

     Investment dealers or their representatives may receive different
compensation depending on which Class of shares they sell. Shares may be
exchanged only for shares of the same Class of another Pioneer mutual fund and
shares acquired in the exchange will continue to be subject to any CDSC
applicable to the shares of the Pioneer mutual fund originally purchased. Shares
sold outside the U.S. to persons who are not U.S. citizens may be subject to
different sales charges, CDSCs and dealer compensation arrangements in
accordance with local laws and business practices.

VI. SHARE PRICE

   
     Shares of the Fund are sold at the public offering price, which is the net
asset value per share, plus the applicable sales charge. Net asset value per
share of each Class of the Fund is determined by dividing the value of its
assets, less liabilities attributable to that Class, by the number of shares of
that Class outstanding. The net asset value is computed once daily, on each day
the New York Stock Exchange (the "Exchange") is open, as of the close of regular
trading on the Exchange.
    

     Securities are valued at the last sale price on the principal exchange or
market where they are traded. Securities which have not traded on the date of
valuation or securities for which sales prices are not generally reported are
valued at the mean between the current bid and asked prices. All assets of the
Fund for which there is no other readily available valuation method are valued
at their fair value as determined in good faith by the Trustees.

VII. HOW TO BUY FUND SHARES

   
     You may buy Fund shares from any securities broker-dealer which has a
selling agreement with PFD. If you do not have a securities broker-dealer,
please call 1-800-225-6292. Shares will be purchased at the public offering
price, that is, the net asset value per share plus any applicable sales charge,
next computed after receipt of a purchase order, except as set forth below.
    

     The minimum initial investment is $1,000 for Class A, Class B and Class C
shares except as specified below. The minimum initial investment is $50 for
Class A accounts being established to utilize monthly bank drafts, government
allotments, payroll deduction and other similar automatic investment plans.
Separate minimum investment requirements apply to retirement plans and to
telephone and wire orders placed by broker-dealers; no sales charges or minimum
requirements apply to the reinvestment of dividends or capital gains
distributions. The minimum subsequent investment is $50 for Class A shares and
$500 for Class B and Class C shares except that the subsequent minimum
investment amount for Class B and Class C share accounts may be as little as $50
if an automatic investment plan is established (see "Automatic Investment
Plans").

   
     Telephone Purchases. Your account is automatically authorized to have the
telephone purchase privilege unless you indicate otherwise on your Account
Application or by writing to Pioneering Services Corporation ("PSC"). The
telephone purchase option may be used to purchase additional shares for an
existing mutual fund account; it may not be used to establish a new account.
Proper account identification will be required for each telephone purchase. A
maximum of $25,000 per account may be purchased by telephone each day. The
telephone purchase privilege is available to Individual Retirement Accounts
("IRAs") but may not be available to other types of retirement plan accounts.
Call PSC for more information.
    

     You are strongly urged to consult with your financial representative prior
to requesting a telephone purchase. To purchase shares by telephone, you must
establish your bank account of record by completing the appropriate section of
your Account Application or an Account Options Form. PSC will electronically
debit the amount of each purchase from this predesignated bank account.
Telephone purchases may not be made for 30 days after the establishment of your
bank of record or any change to your bank information.

     Telephone purchases will be priced at the net asset value plus any
applicable sales charge next determined after PSC's

                                       8

<PAGE>

receipt of a telephone purchase instruction and receipt of good funds (usually
three days after the purchase instruction). You may always elect to deliver
purchases to PSC by mail. See "Telephone Transactions and Related Liabilities"
for additional information.

Class A Shares

   
     You may buy Class A shares at the public offering price, including a sales
charge as follows:
    

                                  Sales Charge as a % of
                                  ------------------------
                                                            Dealer
                                                          Allowance
                                                 Net      as a % of
                                   Offering     Amount     Offering
       Amount of Purchase           Price      Invested     Price
--------------------------------- ----------- ----------- -----------
Less than $100,000                4.50%       4.71%       4.00%
$100,000 but less than $250,000   3.50%       3.63%       3.00%
$250,000 but less than $500,000   2.50%       2.56%       2.00%
$500,000 but less than
 $1,000,000                       2.00%       2.04%       1.75%
$1,000,000 or more                 -0-         -0-        See below

   
     The schedule of sales charges above is applicable to purchases of Class A
shares of the Fund by (i) an individual, (ii) an individual and his or her
spouse and children under the age of 21 and (iii) a trustee or other fiduciary
of a trust estate or fiduciary account or related trusts or accounts including
pension, profit-sharing and other employee benefit trusts qualified under
Section 401 or 408 of the Code, although more than one beneficiary is involved.
The sales charges applicable to a current purchase of Class A shares of the Fund
by a person listed above is determined by adding the value of shares to be
purchased to the aggregate value (at the then current offering price) of shares
of any of the other Pioneer mutual funds previously purchased and then owned,
provided PFD is notified by such person or his or her broker-dealer each time a
purchase is made which would qualify. Pioneer mutual funds include all mutual
funds for which PFD serves as principal underwriter. At the sole discretion of
PFD, holdings of funds domiciled outside the U.S., but which are managed by
affiliates of PMC, may be included for this purpose.

     No sales charge is payable at the time of purchase on investments of $1
million or more or for purchases by participants in certain group plans
(described below) subject to a CDSC of 1% which may be imposed in the event of a
redemption of Class A shares within 12 months of purchase. See "How to Sell Fund
Shares." PFD may, in its discretion, pay a commission to broker-dealers who
initiate and are responsible for such purchases as follows: 1% on the first $5
million invested; 0.50% on the next $45 million; and 0.25% on the excess over
$50 million. These commissions will not be paid if the purchaser is affiliated
with the broker-dealer or if the purchase represents the reinvestment of a
redemption made during the previous 12 calendar months. Broker-dealers who
receive a commission in connection with Class A share purchases at net asset
value by 401(a) or 401(k) retirement plans with 1,000 or more eligible
participants or with at least $10 million in plan assets will be required to
return any commission paid or a pro rata portion thereof if the retirement plan
redeems its shares within 12 months of purchase. See also "How to Sell Fund
Shares." In connection with PGI's acquisition of FMC and contingent upon the
achievement of certain sales objectives, PFD may pay to Mutual of Omaha Investor
Services, Inc. 50% of PFD's retention of any sales commission on sales of the
Fund's Class A shares through such dealer. From time to time, PFD may elect to
reallow the entire initial sales charge to participating dealers for all sales
of Class A shares with respect to which orders are placed during a particular
period. Dealers to whom substantially the entire sales charge is reallowed may
be deemed to be underwriters under the federal securities laws.

     Qualifying for a Reduced Sales Charge. Class A shares of the Fund may be
sold at a reduced or eliminated sales charge to certain group plans ("Group
Plans") under which a sponsoring organization makes recommendations to, permits
group solicitation of, or otherwise facilitates purchases by, its employees,
members or participants. Information about such arrangements is available from
PFD.

     Class A shares of the Fund may also be sold at net asset value per share
without a sales charge to: (a) current or former Trustees and officers of the
Fund and partners and employees of its legal counsel; (b) current or former
directors, officers, employees or sales representatives of PGI or its
subsidiaries; (c) current or former directors, officers, employees or sales
representatives of any subadviser or predecessor investment adviser to any
investment company for which PMC serves as investment adviser, and the
subsidiaries or affiliates of such persons; (d) current or former officers,
partners, employees or registered representatives of broker-dealers which have
entered into selling agreements with PFD; (e) members of the immediate families
of any of the persons above; (f) any trust, custodian, pension, profit-sharing
or other benefit plan of the foregoing persons; (g) insurance company separate
accounts; (h) certain "wrap accounts" for the benefit of clients of financial
planners adhering to standards established by PFD; (i) other funds and accounts
for which PMC or any of its affiliates serves as investment adviser or manager;
and (j) certain unit investment trusts. Shares so purchased are purchased for
investment purposes and may not be resold except through redemption or
repurchase by or on behalf of the Fund. The availability of this privilege is
conditioned upon the receipt by PFD of written notification of eligibility.
Class A shares of the Fund may be sold at net asset value per share without a
sales charge to 401(k) retirement plans with 100 or more participants or at
least $500,000 in plan assets. Class A shares of the Fund may be sold at net
asset value without a sales charge to Optional Retirement Program (the
"Program") participants if (i) the employer has authorized a limited number of
investment company providers for the Program, (ii) all authorized investment
company providers offer their shares to Program participants at net asset value,
(iii) the employer has agreed in writing to actively promote the authorized
investment providers to Program participants and (iv) the Program provides for a
matching contribution for each participant contribution. Shares of the Fund may
also be sold at net asset value without a sales charge in connection with
certain reorganization, liquidation or acquisition transactions involving other
investment companies or personal holding companies.

     Investors who are clients of a broker-dealer with a current selling
agreement with PFD may purchase Class A shares of the Fund at net asset value,
without a sales charge, to the extent that the purchase price is paid out of
proceeds from one or more redemptions by the investor of shares of certain
    

                                       9

<PAGE>

   
other mutual funds. In order for a purchase to qualify for this privilege, the
investor must document to the broker-dealer that the redemption occurred within
the 60 days immediately preceding the purchase of Class A shares; that the
client paid a sales charge on the original purchase of the shares redeemed; and
that the mutual fund whose shares were redeemed also offers net asset value
purchases to redeeming shareholders of any of the Pioneer mutual funds. Further
details may be obtained from PFD.

     Reduced sales charges are available for purchases of $100,000 or more of
Class A shares (excluding any reinvestments of dividends and capital gains
distributions) made within a 13-month period pursuant to a Letter of Intent
("LOI") which may be established by completing the Letter of Intent section of
the Account Application. The reduced sales charge will be the charge that would
be applicable to the purchase of the specified amount of Class A shares as if
the shares had all been purchased at the same time. A purchase not made pursuant
to an LOI may be included if the LOI is submitted to PSC within 90 days of such
purchase. You may also obtain the reduced sales charge by including the value
(at current offering price) of all your Class A shares in the Fund and all other
Pioneer mutual funds held of record as of the date of your LOI in the amount
used to determine the applicable sales charge for the Class A shares to be
purchased under the LOI. Five percent of your total intended purchase amount
will be held in escrow by PSC, registered in your name, until the terms of the
LOI are fulfilled.

     You are not obligated to purchase the amount specified in your LOI. If,
however, the amount actually purchased during the 13-month period is more or
less than that indicated in your LOI, an adjustment in the sales charge will be
made. If a payment to cover actual sales charges is due, it must be paid to PFD
within 20 days after PFD or your dealer sends you a written request otherwise
PFD will direct PSC to liquidate sufficient shares from your escrow account to
cover the amount due. See the Statement of Additional Information for more
information.
    

Class B Shares

     You may buy Class B shares at net asset value per share next computed after
receipt of a purchase order without the imposition of an initial sales charge;
however, Class B shares redeemed within six years of purchase will be subject to
a CDSC at the rates shown in the table below. The charge will be assessed on the
amount equal to the lesser of the current market value or the original purchase
cost of the shares being redeemed. No CDSC will be imposed on increases in
account value above the initial purchase price, including shares derived from
the reinvestment of dividends or capital gains distributions.

     The amount of the CDSC, if any, will vary depending on the number of years
from the time of purchase until the time of redemption of Class B shares. For
the purpose of determining the number of years from the time of any purchase,
all payments during a quarter will be aggregated and deemed to have been made on
the first day of that quarter. In processing redemptions of Class B shares, the
Fund will first redeem shares not subject to any CDSC, and then shares held
longest during the six-year period. As a result, you will pay the lowest
possible CDSC.

   
     The CDSC for Class B shares subject to a CDSC upon redemption will be
determined as follows:

Year Since                  CDSC as a Percentage of Dollar
Purchase                       Amount Subject to CDSC
------------------------   --------------------------------
First                       4.0%
Second                      4.0%
Third                       3.0%
Fourth                      3.0%
Fifth                       2.0%
Sixth                       1.0%
Seventh and thereafter      none

     Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to the
Fund in connection with the sale of Class B shares, including the payment of
compensation to broker-dealers.

     Class B shares will automatically convert into Class A shares at the end of
the calendar quarter that is eight years after the purchase date, except as
noted below. Class B shares acquired by exchange from Class B shares of another
Pioneer mutual fund will convert into Class A shares based on the date of the
initial purchase and the applicable CDSC. Class B shares acquired through
reinvestment of distributions will convert into Class A shares based on the date
of the initial purchase to which such shares relate. For this purpose, Class B
shares acquired through reinvestment of distributions will be attributed to
particular purchases of Class B shares in accordance with such procedures as the
Trustees may determine from time to time. The conversion of Class B shares to
Class A shares is subject to the continuing availability of a ruling from the
Internal Revenue Service ("IRS"), which the Fund has obtained, or an opinion of
counsel that such conversions will not constitute taxable events for federal tax
purposes. There can be no assurance that such ruling will continue to be in
effect at the time any particular conversion would occur. The conversion of
Class B shares to Class A shares will not occur if such ruling is no longer in
effect and such an opinion is not available and, therefore, Class B shares would
continue to be subject to higher expenses than Class A shares for an
indeterminate period.

Class C Shares

     You may buy Class C shares at the net asset value per share next computed
after receipt of a purchase order without the imposition of an initial sales
charge; however, Class C shares redeemed within one year of purchase will be
subject to a CDSC of 1%. The charge will be assessed on the amount equal to the
lesser of the current market value or the original purchase cost of the shares
being redeemed. No CDSC will be imposed on increases in account value above the
initial purchase price, including shares derived from the reinvestment of
dividends or capital gains distributions. Class C shares do not convert to any
other Class of Fund shares.
    

     For the purpose of determining the time of any purchase, all payments
during a quarter will be aggregated and deemed to have been made on the first
day of that quarter. In processing redemptions of Class C shares, the Fund will
first redeem shares not subject to any CDSC, and then shares held for the

                                       10

<PAGE>

shortest period of time during the one-year period. As a result, you will pay
the lowest possible CDSC.

     Proceeds from the CDSC are paid to PFD and are used in whole or in part to
defray PFD's expenses related to providing distribution-related services to the
Fund in connection with the sale of Class C shares, including the payment of
compensation to broker-dealers.

     Waiver or Reduction of Contingent Deferred Sales Charge. The CDSC on Class
B shares may be waived or reduced for non-retirement accounts if: (a) the
redemption results from the death of all registered owners of an account (in the
case of UGMAs, UTMAs and trust accounts, the waiver applies upon the death of
all beneficial owners) or a total and permanent disability (as defined in
Section 72 of the Code) of all registered owners occurring after the purchase of
the shares being redeemed or (b) the redemption is made in connection with
limited automatic redemptions as set forth in "Systematic Withdrawal Plans"
(limited in any year to 10% of the value of the account in the Fund at the time
the withdrawal plan is established).

   
     The CDSC on Class B shares may be waived or reduced for retirement plan
accounts if: (a) the redemption results from the death or a total and permanent
disability (as defined in Section 72 of the Code) occurring after the purchase
of the shares being redeemed of a shareholder or participant in an
employer-sponsored retirement plan; (b) the distribution is to a participant in
an IRA, 403(b) or employer-sponsored retirement plan, is part of a series of
substantially equal payments made over the life expectancy of the participant or
the joint life expectancy of the participant and his or her beneficiary or as
scheduled periodic payments to a participant (limited in any year to 10% of the
value of the participant's account at the time the distribution amount is
established; a required minimum distribution due to the participant's attainment
of age 70-1/2 may exceed the 10% limit only if the distribution amount is based
on plan assets held by Pioneer); (c) the distribution is from a 401(a) or 401(k)
retirement plan and is a return of excess employee deferrals or employee
contributions or a qualifying hardship distribution as defined by the Code or
results from a termination of employment (limited with respect to a termination
to 10% per year of the value of the plan's assets in the Fund as of the later of
the prior December 31 or the date the account was established unless the plan's
assets are being rolled over to or reinvested in the same class of shares of a
Pioneer mutual fund subject to the CDSC of the shares originally held); (d) the
distribution is from an IRA, 403(b) or employer-sponsored retirement plan and is
to be rolled over to or reinvested in the same class of shares in a Pioneer
mutual fund and which will be subject to the applicable CDSC upon redemption;
(e) the distribution is in the form of a loan to a participant in a plan which
permits loans (each repayment of the loan will constitute a new sale which will
be subject to the applicable CDSC upon redemption); or (f) the distribution is
from a qualified defined contribution plan and represents a participant's
directed transfer (provided that this privilege has been pre-authorized through
a prior agreement with PFD regarding participant directed transfers).

     The CDSC on Class C shares and on any Class A shares subject to a CDSC may
be waived or reduced as follows: (a) for automatic redemptions as described in
"Systematic Withdrawal Plans" (limited to 10% of the value of the account); (b)
if the redemption results from the death or a total and permanent disability (as
defined in Section 72 of the Code) occurring after the purchase of the shares
being redeemed of a shareholder or participant in an employer-sponsored
retirement plan; (c) if the distribution is part of a series of substantially
equal payments made over the life expectancy of the participant or the joint
life expectancy of the participant and his or her beneficiary; or (d) if the
distribution is to a participant in an employer-sponsored retirement plan and is
(i) a return of excess employee deferrals or contributions, (ii) a qualifying
hardship distribution as defined by the Code, (iii) from a termination of
employment, (iv) in the form of a loan to a participant in a plan which permits
loans, or (v) from a qualified defined contribution plan and represents a
participant's directed transfer (provided that this privilege has been 
preauthorized through a prior agreement with PFD regarding participant directed
transfers).

     The CDSC on any shares subject to a CDSC may be waived or reduced for
either non-retirement or retirement plan accounts if the redemption is made
pursuant to the Fund's right to liquidate or involuntarily redeem shares in a
shareholder's account. The CDSC on any shares subject to a CDSC will not be
applicable if the selling broker-dealer elects, with PFD's approval, to waive
receipt of the commission normally paid at the time of the sale.

     Broker-Dealers. An order for any Class of Fund shares received by PFD from
a broker-dealer prior to the close of regular trading on the Exchange is
confirmed at the price appropriate for that Class as determined at the close of
regular trading on the Exchange on the day the order is received, provided the
order is received by PFD prior to PFD's close of business (usually, 5:30 p.m.
Eastern Time). It is the responsibility of broker-dealers to transmit orders so
that they will be received by PFD prior to its close of business. PFD or its
affiliates may provide additional compensation to certain dealers or such
dealers' affiliates based on certain objective criteria established from time to
time by PFD. All such payments are made out of PFD's or the affiliate's own
assets. These payments will not change the price an investor will pay for shares
or the amount that the Fund will receive from such sale.
    

     General. The Fund reserves the right in its sole discretion to withdraw all
or any part of the offering of shares when, in the judgment of the Fund's
management, such withdrawal is in the best interest of the Fund. An order to
purchase shares is not binding on, and may be rejected by, PFD until it has been
confirmed in writing by PFD and payment has been received.

VIII. HOW TO SELL FUND SHARES

     You can arrange to sell (redeem) fund shares on any day the Exchange is
open by selling either some or all of your shares to the Fund.

     You may sell your shares either through your broker-dealer or directly to
the Fund. Please note the following:

                                       11

<PAGE>

   
    [bullet] If you are selling shares from a retirement account, other than an
             IRA, you must make your request in writing (except for exchanges to
             other Pioneer mutual funds which can be requested by phone or in
             writing). Call 1-800-622-0176 for more information.

    [bullet] If you are selling shares from a non-retirement account or an IRA,
             you may use any of the methods described below.
    

     Your shares will be sold at the share price next calculated after your
order is received in good order less any applicable CDSC. Sale proceeds
generally will be sent to you in cash, normally within seven days after your
order is received in good order. The Fund reserves the right to withhold payment
of the sale proceeds until checks received by the Fund in payment for the shares
being sold have cleared, which may take up to 15 calendar days from the purchase
date.

   
     In Writing. You may sell your shares by delivering a written request,
signed by all registered owners, in good order to PSC, however, you must use a
written request, including a signature guarantee, to sell your shares if any of
the following applies:
    

    [bullet] you wish to sell over $50,000 worth of shares,

    [bullet] your account registration or address has changed within the last 30
             days,

    [bullet] the check is not being mailed to the address on your account
             (address of record),

    [bullet] the check is not being made out to the account owners, or

   
    [bullet] the sale proceeds are being transferred to a Pioneer mutual fund
             account with a different registration.

     Your request should include your name, the Fund's name, your fund account
number, the Class of shares to be redeemed, the dollar amount or number of
shares to be redeemed, and any other applicable requirements as described below.
Unless instructed otherwise, PSC will send the proceeds of the sale to the
address of record. Fiduciaries and corporations are required to submit
additional documents. For more information, contact PSC at 1-800-225-6292.

     Written requests will not be processed until they are received in good
order by PSC. Good order means that there are no outstanding claims or requests
to hold redemptions on the account, any certificates are endorsed by the record
owner(s) exactly as the shares are registered and the signature(s) are
guaranteed by an eligible guarantor. You should be able to obtain a signature
guarantee from a bank, broker, dealer, credit union (if authorized under state
law), securities exchange or association, clearing agency or savings
association. A notary public cannot provide a signature guarantee. Signature
guarantees are not accepted by facsimile ("fax"). For additional information
about the necessary documentation for redemption by mail, please contact PSC at
1-800-225-6292.

     By Telephone or by Fax. Your account is automatically authorized to have
the telephone redemption privilege unless you indicate otherwise on your Account
Application or by writing to PSC. The telephone redemption option is not
available to retirement plan accounts, except IRAs. You may redeem up to $50,000
per account per day of your shares by telephone or fax and receive the proceeds
by check or bank wire or electronic funds transfer. The redemption proceeds must
be made payable exactly as the account is registered. To receive the proceeds by
check: the check must be sent to the address of record which must not have
changed in the last 30 days. To receive the proceeds by bank wire or by
electronic funds transfer: the proceeds must be sent to your bank address of
record which must have been properly predesignated either on your Account
Application or on an Account Options Form and which must not have changed in the
last 30 days. To redeem by fax send your redemption request to 1-800-225-4240.
The telephone redemption option is not available to retirement plan accounts.
You may always elect to deliver redemption instructions to PSC by mail. See
"Telephone Transactions and Related Liabilities" below. Telephone and fax
redemptions will be priced as described above. You are strongly urged to consult
with your financial representative prior to requesting a telephone redemption.
    

     Selling Shares Through Your Broker-Dealer. The Fund authorized PFD to act
as its agent in the repurchase of shares of the Fund from qualified
broker-dealers and reserves the right to terminate this procedure at any time.
Your broker-dealer must receive your request before the close of business on the
Exchange and transmit it to PFD before PFD's close of business to receive that
day's redemption price. Your broker-dealer is responsible for providing all
necessary documentation to PFD and may charge you for its services.

     Small Accounts. The minimum account value is $500. If you hold shares of
the Fund in an account with a net asset value of less than the minimum required
amount due to redemptions or exchanges, the Fund may redeem the shares held in
this account at net asset value if you have not increased the net asset value of
the account to at least the minimum required amount within six months of notice
by the Fund to you of the Fund's intention to redeem the shares.

   
     CDSC on Class A Shares. Purchases of Class A shares of $1 million or more,
or by participants in a Group Plan which were not subject to an initial sales
charge, may be subject to a CDSC upon redemption. A CDSC is payable to PFD on
these investments in the event of a share redemption within 12 months following
the share purchase, at the rate of 1% of the lesser of the value of the shares
redeemed (exclusive of reinvested dividend and capital gain distributions) or
the total cost of such shares. Shares subject to the CDSC which are exchanged
into another Pioneer mutual fund will continue to be subject to the CDSC until
the original 12-month period expires. However, no CDSC is payable upon
redemption with respect to Class A shares purchased by 401(a) or 401(k)
retirement plans with 1,000 or more eligible participants or with at least $10
million in plan assets.
    

     General. Redemptions may be suspended or payment postponed during any
period in which any of the following conditions exist: the Exchange is closed or
trading on the Exchange is restricted; an emergency exists as a result of which
disposal by the Fund of securities owned by it is not reasonably practicable or
it is not reasonably practicable for the Fund to fairly determine the value of
the net assets of its portfolio; or the SEC, by order, so permits. Redemptions
and repurchases are taxable transactions to shareholders. The

                                       12

<PAGE>

net asset value per share received upon redemption or repurchase may be more or
less than the cost of shares to an investor, depending on the market value of
the portfolio at the time of redemption or repurchase.

IX. HOW TO EXCHANGE FUND SHARES

   
     Written Exchanges. You may exchange your shares by sending a letter of
instruction to PSC. Your letter should include your name, the name of the Fund
out of which you wish to exchange and the name of the Pioneer mutual fund into
which you wish to exchange, your fund account number(s), the Class of shares to
be exchanged and the dollar amount or number of shares to be exchanged. Written
exchange requests must be signed by all record owner(s) exactly as the shares
are registered.

     Telephone Exchanges. Your account is automatically authorized to have the
telephone exchange privilege unless you indicate otherwise on your Account
Application or by writing to the PSC. Proper account identification will be
required for each telephone exchange. Telephone exchanges may not exceed
$500,000 per account per day. Each telephone exchange request, whether by voice
or FactFone(SM), will be recorded. You are strongly urged to consult with your
financial representative prior to requesting a telephone exchange. See
"Telephone Transactions and Related Liabilities" below.

     Automatic Exchanges. You may automatically exchange shares from one Pioneer
mutual fund account for shares of the same Class in another Pioneer mutual fund
account on a monthly or quarterly basis. The accounts must have identical
registrations and the originating account must have a minimum balance of $5,000.
The exchange will be effective on the day of the month designated on your
Account Application or Account Options Form.
    

     General. Exchanges must be at least $1,000. You may exchange your
investment from one Class of Fund shares at net asset value, without a sales
charge, for shares of the same Class of any other Pioneer mutual fund. Not all
Pioneer mutual funds offer more than one Class of shares. A new Pioneer mutual
fund account opened through an exchange must have a registration identical to
that on the original account.

     Shares which would normally be subject to a CDSC upon redemption will not
be charged the applicable CDSC at the time of an exchange. Shares acquired in an
exchange will be subject to the CDSC of the shares originally held. For purposes
of determining the amount of any applicable CDSC, the length of time you have
owned shares acquired by exchange will be measured from the date you acquired
the original shares and will not be affected by any subsequent exchange.

     Exchange requests received by PSC before 4:00 p.m. Eastern Time will be
effective on that day if the requirements above have been met, otherwise, they
will be effective on the next business day. PSC will process exchanges only
after receiving an exchange request in good order. There are currently no fees
or sales charges imposed at the time of an exchange. An exchange of shares may
be made only in states where legally permitted. For federal and (generally)
state income tax purposes, an exchange is considered to be a sale of the shares
of the Fund exchanged and a purchase of shares in another Pioneer mutual fund.
Therefore, an exchange could result in a gain or loss on the shares sold,
depending on the tax basis of these shares and the timing of the transaction,
and special tax rules may apply.

     You should consider the differences in objectives and policies of the
Pioneer mutual funds, as described in each fund's current prospectus, before
making any exchange. For the protection of the Fund's performance and
shareholders, the Fund and PFD reserve the right to refuse any exchange request
or restrict, at any time without notice, the number and/or frequency of
exchanges to prevent abuses of the exchange privilege. Such abuses may arise
from frequent trading in response to short-term market fluctuations, a pattern
of trading by an individual or group that appears to be an attempt to "time the
market," or any other exchange request which, in the view of management, will
have a detrimental effect on the Fund's portfolio management strategy or its
operations. In addition, the Fund and PFD reserve the right to charge a fee for
exchanges or to modify, limit, suspend or discontinue the exchange privilege
with notice to shareholders as required by law.

X. DISTRIBUTION PLANS

     The Fund has adopted a Plan of Distribution for each Class of shares (the
"Class A Plan," "Class B Plan," and "Class C Plan") in accordance with Rule
12b-1 under the 1940 Act pursuant to which certain distribution and service fees
are paid.

     Pursuant to the Class A Plan, the Fund reimburses PFD for its actual
expenditures to finance any activity primarily intended to result in the sale of
Class A shares or to provide services to holders of Class A shares, provided the
categories of expenses for which reimbursement is made are approved by the
Fund's Board of Trustees. As of the date of this Prospectus, the Board of
Trustees has approved the following categories of expenses for Class A shares of
the Fund: (i) a service fee to be paid to qualified broker-dealers in an amount
not to exceed 0.25% per annum of the Fund's daily net assets attributable to
Class A shares; (ii) reimbursement to PFD for its expenditures for broker-dealer
commissions and employee compensation on certain sales of the Fund's Class A
shares with no initial sales charge (See "How to Buy Fund Shares"); and (iii)
reimbursement to PFD for expenses incurred in providing services to Class A
shareholders and supporting broker-dealers and other organizations (such as
banks and trust companies) in their efforts to provide such services. Banks are
currently prohibited under the Glass-Steagall Act from providing certain
underwriting or distribution services. If a bank was prohibited from acting in
any capacity or providing any of the described services, management would
consider what action, if any, would be appropriate.

     Expenditures of the Fund pursuant to the Class A Plan are accrued daily and
may not exceed 0.25% of the Fund's average daily net assets attributable to
Class A shares. Distribution expenses of PFD are expected to substantially
exceed the distribution fees paid by the Fund in a given year. The

                                       13

<PAGE>

   
Class A Plan may not be amended to increase materially the annual percentage
limitation of average net assets which may be spent for the services described
therein without approval of the shareholders of the Fund. The Class A Plan does
not provide for the carryover of reimbursable expenses beyond 12 months from the
time the Fund is first invoiced for an expense. For the fiscal year ended
December 31, 1996, there was an allowable carryover of distribution expenses
reimbursable to PFD of $13,706 (less than 0.01% of the net assets attributable
to the Class A shares of the Fund).
    

     Both the Class B and the Class C Plan provide that the Fund will pay a
distribution fee at the annual rate of 0.75% of the Fund's average daily net
assets attributable to the applicable Class of shares and will pay PFD a service
fee at the annual rate of 0.25% of the Fund's average daily net assets
attributable to that Class of shares. The distribution fee is intended to
compensate PFD for its distribution services to the Fund. The service fee is
intended to be additional compensation for personal services and/or account
maintenance services with respect to Class B or Class C shares. PFD also
receives the proceeds of any CDSC imposed on the redemption of Class B or Class
C shares.

     Commissions of 4%, equal to 3.75% of the amount invested and a first year's
service fee equal to 0.25% of the amount invested in Class B shares, are paid to
broker-dealers who have selling agreements with PFD. PFD may advance to dealers
the first year service fee at a rate up to 0.25% of the purchase price of such
shares and, as compensation therefore, PFD may retain the service fee paid by
the Fund with respect to such shares for the first year after purchase. Dealers
will become eligible for additional service fees with respect to such shares
commencing in the 13th month following the purchase.

     Commissions of up to 1% of the amount invested in Class C shares,
consisting of 0.75% of the amount invested and a first year's service fee of
0.25% of the amount invested, are paid to broker-dealers who have selling
agreements with PFD. PFD may advance to dealers the first year service fee at a
rate up to 0.25% of the purchase price of such shares and, as compensation
therefore, PFD may retain the service fee paid by the Fund with respect to such
shares for the first year after purchase. Commencing in the 13th month following
the purchase of Class C shares, dealers will become eligible for additional
annual distribution fees and services fees of up to 0.75% and 0.25%,
respectively, of the net asset value of such shares.

   
     When a broker-dealer sells Class B or Class C shares and elects, with PFD's
approval, to waive its right to receive the commission normally paid at the time
of sale, PFD may cause all or a portion of the distribution fees described above
to be paid to the broker-dealer.
    

     Dealers may from time to time be required to meet certain criteria in order
to receive service fees. PFD or its affiliates are entitled to retain all
service fees payable under the Class B Plan or the Class C Plan for which there
is no dealer of record or for which qualification standards have not been met as
partial consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.

XI. DIVIDENDS, DISTRIBUTIONS AND TAXATION

   
     The Fund has elected to be treated, has qualified, and intends to qualify
each year as a "regulated investment company" under Subchapter M of the Code, so
that it will not pay federal income tax on income and capital gains distributed
to shareholders as required under the Code. The Code permits the Fund's
shareholders to treat tax-exempt interest received by the Fund and distributed
to them in the form of "exempt-interest dividends" as tax-exempt interest
provided that the Fund qualifies as a regulated investment company and at least
50% of the value of the total assets of the Fund at the close of each quarter of
its taxable year consists of tax-exempt obligations. However, distributions
derived from interest on certain "private activity bonds" will be subject to the
federal alternative minimum tax for individuals, estates or trusts that are
subject to such tax, and all tax exempt distributions may result in or increase
a corporate shareholder's liability for the federal alternative minimum tax.

     Interest on indebtedness incurred by a shareholder to purchase or carry
shares of the Fund will not be deductible for federal income tax purposes to the
extent it is deemed related to the Fund's exempt-interest dividends. The Fund
may not be an appropriate investment for persons who are "substantial users" of
facilities financed by industrial revenue or private activity bonds or persons
related to substantial users. Shareholders receiving social security or certain
railroad retirement benefits may be subject to federal income tax on a portion
of such benefits as a result of receiving investment income, including
exempt-interest dividends and other distributions paid by the Fund.

     Under the Code, the Fund will be subject to a nondeductible 4% excise tax
on a portion of its undistributed ordinary (taxable) income (if any) and capital
gains if it fails to meet certain distribution requirements with respect to each
calendar year. The Fund intends to make distributions in a timely manner and
accordingly does not expect to be subject to the excise tax. Generally,
dividends from the Fund's taxable net investment income, if any, market discount
income, income from securities lending and net short-term capital gains are
taxable under the Code as ordinary income, and dividends from the Fund's net
long-term capital gains are taxable as long-term capital gains.

     Each business day the Fund declares a dividend consisting of substantially
all of the Fund's net investment income. Shareholders begin earning dividends on
the first business day following receipt of payment for purchased shares. Shares
continue to earn dividends up to and including the date of redemption. Dividends
are normally paid on the last business day of the month or shortly thereafter.
The Fund's net investment income consists of the interest income it earns, less
expenses. The Fund will make distributions from net long term capital gains, if
any, in December. Dividends from net short-term capital gains, if any, may be
paid with such dividends: dividends from income and/or capital gains may also be
paid at such other times as may be necessary for the Fund to avoid federal
income or excise tax.
    

                                       14

<PAGE>

   
     Unless shareholders specify otherwise, all distributions from the Fund will
be automatically reinvested in additional full and fractional shares of the
Fund. For federal income tax purposes, all dividends are taxable as described
above whether a shareholder takes them in cash or reinvests in additional shares
of the Fund. Information as to the tax status of distributions will be provided
to shareholders annually. See "Distribution Options" and "Directed Dividends"
below.

     The Fund's dividends and distributions will not qualify for any
dividends-received deduction available to corporate shareholders.

     Shareholders are required to report all dividends and distributions,
including tax-exempt distributions, on their federal income tax returns.

     Dividends (other than exempt-interest dividends) and other distributions
and the proceeds of redemptions, exchanges or repurchases of Fund shares paid to
individuals and other non-exempt payees may be subject to 31% backup withholding
of federal income tax if the Fund is not provided with the shareholder's correct
taxpayer identification number and certification that the number is correct and
that the shareholder is not subject to backup withholding or the Fund receives
notice from the IRS or a broker that such withholding applies. Please refer to
the Account Application for additional information.

     The description above relates only to U.S. federal income tax consequences
for shareholders who are U.S. persons, i.e. U.S. citizens or residents or U.S.
corporations, partnerships, trusts or estates, and who are subject to U.S.
federal income tax. Fund distributions may also be subject to state and local
income taxes. A state income (and possibly local income and/or intangible
property) tax exemption is generally available to the extent the Fund's
distributions are derived from interest on (or, in the case of intangible
property taxes, the value of its shares is attributable to) certain U.S.
Government obligations and/or tax-exempt municipal obligations issued by or on
behalf of the particular state or a political subdivision thereof, provided in
some states that certain concentration, designation, reporting or other
requirements are satisfied. The Fund will not attempt to and may not satisfy all
such requirements in all states. Non-U.S. shareholders and tax-exempt
shareholders are subject to different tax treatment that is not described above.
Shareholders should consult their own tax advisors regarding state, local and
other applicable tax laws.
    

XII. SHAREHOLDER SERVICES

     PSC is the shareholder services and transfer agent for shares of the Fund.
PSC, a Massachusetts corporation, is a wholly-owned subsidiary of PGI. PSC's
offices are located at 60 State Street, Boston, Massachusetts 02109, and
inquiries to PSC should be mailed to Pioneering Services Corporation, P.O. Box
9014, Boston, Massachusetts 02205-9014. Brown Brothers Harriman & Co. (the
"Custodian") serves as custodian of the Fund's portfolio securities and other
assets. The principal business address of the mutual fund division of the
Custodian is 40 Water Street, Boston, Massachusetts 02109.

Account and Confirmation Statements

   
     PSC maintains an account for each shareholder and all transactions of the
shareholder are recorded in this account. Confirmation statements showing
details of transactions are sent to shareholders as transactions occur, except
Automatic Investment Plan transactions which are confirmed quarterly. The
Pioneer Combined Account Statement, mailed quarterly, is available to
shareholders who have more than one Pioneer mutual fund account.

     Shareholders whose shares are held in the name of an investment
broker-dealer or other party will not normally have an account with the Fund and
might not be able to utilize some of the services available to shareholders of
record. Examples of services which might not be available are purchases,
exchanges or redemptions of shares by mail or telephone, automatic reinvestment
of dividends and capital gains distributions, withdrawal plans, Letters of
Intention, Rights of Accumulation and newsletters.

Additional Investments

     You may add to your account by sending a check (minimum of $50 for Class A
shares and $500 for Class B and Class C shares) to PSC (account number and Class
of shares should be clearly indicated). The bottom portion of a confirmation
statement may be used as a remittance slip to make additional investments.
Additions to your account, whether by check or through a Pioneer Investomatic
Plan, are invested in full and fractional shares of the Fund at the applicable
offering price in effect as of the close of regular trading on the Exchange on
the day of receipt.

Automatic Investment Plans

     You may arrange for regular automatic investments of $50 or more through
government/military allotments, payroll deduction or through a Pioneer
Investomatic Plan. A Pioneer Investomatic Plan provides for a monthly or
quarterly investment by means of a pre-authorized electronic funds transfer or
draft drawn on a checking account. Pioneer Investomatic Plan investments are
voluntary, and you may discontinue the Plan at any time without penalty upon 30
days' written notice to PSC. PSC acts as agent for the purchaser, the broker-
dealer and PFD in maintaining these plans.
    

Financial Reports and Tax Information

     As a shareholder, you will receive financial reports at least semiannually.
In January of each year, the Fund will mail you information about the tax status
of dividends and distributions.

Distribution Options

     Dividends and capital gains distributions, if any, will automatically be
invested in additional shares of the Fund, at the applicable net asset value per
share, unless you indicate another option on the Account Application. Two other
options available are (a) dividends in cash and capital gains distributions in
additional shares; and (b) all dividends and capital gains distributions in
cash. These two options are not available, however, for retirement plans or for
an account with a net asset value of less than $500. Changes in your
distribution options may be made by written request to PSC.

   
     If you elect to receive either dividends or capital gains or both in cash
and a distribution check issued to you is returned by the U.S. Postal Service as
not deliverable or a
    

                                       15

<PAGE>

   
distribution check remains uncashed for six months or more, the amount of the
check may be reinvested in your account. Such additional shares will be
purchased at the then current net asset value. Furthermore, the distribution
option on the account will automatically be changed to the reinvestment option
until such time as you request a different option by writing to PSC.
    

Directed Dividends

     You may elect (in writing) to have the dividends paid by one Pioneer mutual
fund account invested in a second Pioneer mutual fund account. The value of this
second account must be at least $1,000 ($500 for Pioneer Fund or Pioneer II).
Invested dividends may be in any amount, and there are no fees or charges for
this service. Retirement plan shareholders may only direct dividends to accounts
with identical registrations, i.e., PGI IRA Cust for John Smith may only go into
another account registered PGI IRA Cust for John Smith.

Direct Deposit

     If you have elected to take distributions, whether dividends or dividends
and capital gains, in cash, or have established a Systematic Withdrawal Plan,
you may choose to have those cash payments deposited directly into your savings,
checking or NOW bank account. You may establish this service by completing the
appropriate section on the Account Application when opening a new account or the
Account Options Form for an existing account.

Voluntary Tax Withholding

     You may request (in writing) that PSC withhold 28% of the dividends and
capital gains distributions paid from your account (before any reinvestment) and
forward the amount withheld to the IRS as a credit against your federal income
taxes. This option is not available for retirement plan accounts or for accounts
subject to backup withholding.

Telephone Transactions and Related Liabilities

   
     Your account is automatically authorized to have telephone transaction
privileges unless you indicate otherwise on your Account Application or by
writing to PSC. You may purchase, sell or exchange Fund shares by telephone. See
"How to Buy Fund Shares," "How to Sell Fund Shares" and "How to Exchange Fund
Shares" for more information. For personal assistance, call 1-800-225-6292
between 8:00 a.m. and 9:00 p.m. Eastern time on weekdays. Computer-assisted
transactions are available to shareholders who have pre-recorded certain bank
information (see "FactFone(SM)"). You are strongly urged to consult with your
financial representative prior to requesting any telephone transaction. To
confirm that each transaction instruction received by telephone is genuine, PSC
will record each telephone transaction, require the caller to provide the
personal identification number ("PIN") for the account and send you a written
confirmation of each telephone transaction. Different procedures may apply to
accounts that are registered to non-U.S. citizens or that are held in the name
of an institution or in the name of an investment broker-dealer or other
third-party. If reasonable procedures, such as those described above, are not
followed, the Fund may be liable for any loss due to unauthorized or fraudulent
instructions. The Fund may implement other procedures from time to time. In all
other cases, neither the Fund, PSC or PFD will be responsible for the
authenticity of instructions received by telephone, therefore, you bear the risk
of loss for unauthorized or fraudulent telephone transactions.
    

     During times of economic turmoil or market volatility or as a result of
severe weather or a natural disaster, it may be difficult to contact the Fund by
telephone to institute a redemption or exchange. You should communicate with the
Fund in writing if you are unable to reach the Fund by telephone.

FactFone(SM)

     FactFone(SM) is an automated inquiry and telephone transaction system
available to Pioneer mutual fund shareholders by dialing 1-800-225-4321.
FactFone(SM) allows you to obtain current information on your Pioneer mutual
fund accounts and to inquire about the prices and yields of all publicly
available Pioneer mutual funds. In addition, you may use FactFone(SM) to make
computer-assisted telephone purchases, exchanges and redemptions from your
Pioneer mutual fund accounts if you have activated your PIN. Telephone purchases
and redemptions require the establishment of a bank account of record. You are
strongly urged to consult with your financial representative prior to requesting
any telephone transaction. Shareholders whose accounts are registered in the
name of a broker-dealer or other third party may not be able to use
FactFone(SM). See "How to Buy Fund Shares," "How to Exchange Fund Shares," "How
to Sell Fund Shares" and "Telephone Transactions and Related Liabilities." Call
PSC for assistance.

Telecommunications Device for the Deaf (TDD)

     If you have a hearing disability and your own TDD keyboard equipment, you
can call our TDD number toll-free at 1-800-225-1997, weekdays from 8:30 a.m. to
5:30 p.m. Eastern Time to contact our telephone representatives with questions
about your account.

Systematic Withdrawal Plans

   
     If your account has a total value of at least $10,000 you may establish a
Systematic Withdrawal Plan ("SWP") providing for fixed payments at regular
intervals. Withdrawals from Class B and Class C share accounts are limited to
10% of the value of the account at the time the SWP is implemented. See "Waiver
or Reduction of Contingent Deferred Sales Charge" for more information. Periodic
payments of $50 or more will be sent to you, or any person designated by you,
monthly or quarterly, and your periodic redemptions of shares may be taxable to
you. Payments can be made either by check or electronic transfer to a bank
account designated by you. If you direct that withdrawal checks be paid to
another person after you have opened your account, a signature guarantee must
accompany your instructions. Purchases of Class A shares of the Fund at a time
when you have a SWP in effect may result in the payment of unnecessary sales
charges and may therefore be disadvantageous. You may obtain additional
information by calling PSC at 1-800-225-6292 or by referring to the Statement of
Additional Information.
    

Reinstatement Privilege (Class A Shares Only)

     If you redeem all or part of your Class A shares of the Fund, you may
reinvest all or part of the redemption proceeds

                                       16

<PAGE>

   
without a sales charge in Class A shares of the Fund if you send a written
request to PSC not more than 90 days after your shares were redeemed. Your
redemption proceeds will be reinvested at the next determined net asset value of
the Class A shares of the Fund in effect immediately after receipt of the
written request for reinstatement. You may realize a gain or loss for federal
income tax purposes as a result of the redemption, and special tax rules may
apply if a reinstatement occurs. Subject to the provisions outlined under "How
to Exchange Fund Shares" above, you may also reinvest in Class A shares of other
Pioneer mutual funds; in this case you must meet the minimum investment
requirements for each fund you enter.
    

     The 90-day reinstatement period may be extended by PFD for periods of up to
one year for shareholders living in areas that have experienced a natural
disaster, such as a flood, hurricane, tornado, or earthquake.

     The options and services available to shareholders, including the terms of
the Exchange Privilege and the Pioneer Investomatic Plan, may be revised,
suspended or terminated at any time by PFD or by the Fund. You may establish the
services described in this section when you open your account. You may also
establish or revise many of them on an existing account by completing an Account
Options Form, which you may request by calling 1-800-225-6292.

XIII. THE FUND

     The Fund, an open-end management investment company (commonly referred to
as a mutual fund), was established as a Nebraska corporation on January 19, 1968
and reorganized as a Delaware business trust on June 30, 1994. The Fund has
authorized an unlimited number of shares of beneficial interest. As an open-end
management investment company, the Fund continuously offers its shares to the
public and under normal conditions must redeem its shares upon the demand of any
shareholder at the then current net asset value per share. See "How to Sell Fund
Shares." The Fund is not required, and does not intend, to hold annual
shareholder meetings although special meetings may be called for the purpose of
electing or removing Trustees, changing fundamental investment restrictions or
approving a management contract.

     The Fund reserves the right to create and issue additional series of
shares. The Trustees have the authority, without further shareholder approval,
to classify and reclassify the shares of the Fund, or any new series, into one
or more classes. As of the date of this Prospectus, the Trustees have authorized
the issuance of three classes of shares, designated as Class A, Class B and
Class C. The shares of each class represent an interest in the same portfolio of
investments of the Fund. Each class has equal rights as to voting, redemption,
dividends and liquidation, except that each class bears different distribution
and transfer agent fees and may bear other expenses properly attributable to the
particular class. Class A, Class B and Class C shareholders have exclusive
voting rights with respect to the Rule 12b-1 distribution plans adopted by
holders of those shares in connection with the distribution of shares.

     In addition to the requirements under Delaware law, the Declaration of
Trust provides that a shareholder of the Fund may bring a derivative action on
behalf of the Fund only if the following conditions are met: (a) shareholders
eligible to bring such derivative action under Delaware law who hold at least
10% of the outstanding shares of the Fund, or 10% of the outstanding shares of
the series or class to which such action relates, shall join in the request for
the Trustees to commence such action; and (b) the Trustees must be afforded a
reasonable amount of time to consider such shareholder request and investigate
the basis of such claim. The Trustees shall be entitled to retain counsel or
other advisers in considering the merits of the request and shall require an
undertaking by the shareholders making such request to reimburse the Fund for
the expense of any such advisers in the event that the Trustees determine not to
bring such action.

   
     When issued and paid for in accordance with the terms of the Prospectus and
Statement of Additional Information, shares of the Fund are fully-paid and
non-assessable. Shares will remain on deposit with the Fund's transfer agent and
certificates will not normally be issued. The Fund reserves the right to charge
a fee for the issuance of Class A share certificates; certificates will not be
issued for Class B or Class C shares.
    

XIV. INVESTMENT RESULTS

     The Fund may from time to time include yield information for each Class of
Fund shares in advertisements or in information furnished generally to existing
or proposed shareholders. Whenever yield information is provided, it includes a
standardized yield calculation computed by dividing the Fund's net investment
income per share for each class of Fund shares during a base period of 30 days,
or one month, by the maximum offering price per share for each class of Fund
shares on the last day of such base period. (The Fund's net investment income
per share for each Class is determined by dividing the Fund's net investment
income for each Class during the base period by the Class's average number of
shares entitled to receive dividends during the base period). The Class's 30-day
yield is then "annualized" by a computation that assumes that the Class's net
investment income is earned and reinvested for a six-month period at the same
rate as during the 30-day base period and that the resulting six-month income
will be generated over an additional six months.

     The Fund may also from time to time advertise its taxable equivalent yield
for each Class of Fund Shares. The Class's taxable equivalent yield is
determined by dividing that portion of the Class's yield (calculated as
described above) that is tax exempt by one minus the stated federal income tax
rate and adding the product to that portion, if any, of the Class's yield that
is not tax exempt. For a table of sample taxable equivalent yields, please see
the Appendix.

     The average annual total return (for a designated period of time) on an
investment in the Fund may also be included in advertisements, and furnished to
existing or prospective shareholders. The average annual total return for each
Class is computed in accordance with the SEC's standardized formula. The
calculation for all Classes assumes the reinvestment of all dividends and
distributions at net asset value and

                                       17

<PAGE>

does not reflect the impact of federal or state income taxes. In addition, for
Class A shares the calculation assumes the deduction of the maximum sales charge
of 4.50%; for Class B and Class C shares the calculation reflects the deduction
of any applicable CDSC. The periods illustrated would normally include one, five
and ten years (or since the commencement of the public offering of the shares of
a Class, if shorter) through the most recent calendar quarter.

     One or more additional measures and assumptions, including but not limited
to historical total returns; distribution returns; results of actual or
hypothetical investments; changes in dividends, distributions or share values;
or any graphic illustration of such data may also be used. These data may cover
any period of the Fund's existence and may or may not include the impact of
sales charges, taxes or other factors. Yield and return quotations should also
be considered in relation to the risks associated with the Fund's investment
objective and policies. Yields may be affected by sinking fund call provisions
and optional redemption features of portfolio securities which may have the
effect of reducing the stated average maturity of the Fund's portfolio.

     Other investments or savings vehicles and/or unmanaged market indices,
indicators of economic activity or averages of mutual funds results may be cited
or compared with the investment results of the Fund. Rankings or listings by
magazines, newspapers or independent statistical or rating services, such as
Lipper Analytical Services, Inc., may also be referenced.

     The Fund's yield and investment results will be calculated separately for
each Class of Fund shares and will vary from time to time depending on market
conditions, the composition of the Fund's portfolio, the operating expenses of
the Fund and the expenses attributed to a particular Class of Fund shares. All
quoted investment results are historical and should not be considered
representative of what an investment in the Fund may earn in any future period.
For further information about the calculation methods and uses of the Fund's
investment results, see the Statement of Additional Information.

                                       18

<PAGE>

XV. APPENDIX:
Taxable Equivalent Yields*

   
     The tables below show the approximate taxable yields which are equivalent
to hypothetical tax-exempt yields from 5% to 9% under Federal income tax laws
applicable to individuals during 1997.

<TABLE>
<CAPTION>
                                                                      Taxable Yield Required 
  Single Return          Joint Return                             To Equal A Tax Free Yield Of:
-------------------   --------------------              -----------------------------------------------
                                              Tax
       (Taxable Income)*                      Rate       5%        6%        7%        8%        9%
------------------------------------------   --------   -------   -------   -------   -------   -------
<S>                    <C>                    <C>        <C>       <C>       <C>       <C>       <C>
Up to $24,650          Up to $41,200          15.0%      5.88      7.06       8.24      9.41     10.59
$24,651-$59,750        $41,201-$99,600        28.0%      6.94      8.33       9.72     11.11     12.50
$59,751-$124,650       $99,601-$151,750       31.0%      7.25      8.70      10.14     11.59     13.04
$124,651-$271,050      $151,751-$271,050      36.0%      7.81      9.38      10.94     12.50     14.06
Over $271,050          Over $271,050          39.6%      8.28      9.93      11.59     13.25     14.90
</TABLE>
    

 * Net amount subject to Federal income tax after deductions and exemptions.
   Table does not reflect the effect of Deduction Limitation and Exemption
   Phaseout described below** or of the alternative minimum tax, if any. Table
   assumes person filing Single Return is not a married individual filing a
   separate return, a surviving spouse, or a head of household.

   
** Deduction Limitation: Each $100 of adjusted gross income ("AGI") in excess of
   $121,200 ($60,600 for marrieds filing separately) causes the loss of $3 of
   itemized deductions. This limitation affects all itemized deductions other
   than medical expenses, investment interest, and casualty, theft and wagering
   losses. However, not more than 80% of a taxpayer's itemized deductions can be
   eliminated.The threshold amounts will be adjusted for inflation from year to
   year.

   Exemption Phaseout: Each $2,500 or fraction thereof of AGI in excess of
   $181,800 for joint filers ($121,200 for single taxpayers) causes taxpayers to
   lose 2% of their personal exemptions. The threshold amounts will be adjusted
   for inflation from year to year.
    

The following formula can be used to calculate a taxable yield which is
equivalent to the corresponding tax-free yield:

              Tax Free Yield    
          ----------------------  =  Taxable Equivalent Yield
           1 - Your Tax Bracket

For example, if you are in the 28% tax bracket and earn a tax-free yield of 7%,
the taxable equivalent yield would be 9.72%.

             7%       .07    
           ------- = ----- =  9.72%
           1 - 28%    .72

   
There can be no assurance that the Fund will achieve any specific
tax-exempt yield. While it is expected that a substantial portion of the
interest income distributed to investors in the Fund will be exempt from regular
federal income taxes, portions of such distributions may be subject to regular
federal income tax or federal alternative minimum tax. In addition, all or a
substantial portion of such distributions may be subject to state and local
taxes. Subsequent tax law changes could result in prospective or retroactive
changes in the tax brackets, tax rates and tax equivalent yields set forth
above.
    

                                       19

<PAGE>

Pioneer                                           [Pioneer logo]
Tax-Free
Income
Fund

60 State Street
Boston, Massachusetts 02109

OFFICERS

JOHN F. COGAN, JR., Chairman and President
DAVID D. TRIPPLE, Executive Vice President
MARK WINTER, Vice President
WILLIAM H. KEOUGH, Treasurer
JOSEPH P. BARRI, Secretary

INVESTMENT ADVISER
PIONEERING MANAGEMENT CORPORATION

PRINCIPAL UNDERWRITER
PIONEER FUNDS DISTRIBUTOR, INC.

CUSTODIAN
BROWN BROTHERS HARRIMAN & CO.

INDEPENDENT PUBLIC ACCOUNTANTS
ARTHUR ANDERSEN LLP

   
LEGAL COUNSEL
HALE AND DORR LLP

0497-4145
(C)Pioneer Funds Distributor, Inc.
    


SHAREHOLDER SERVICES AND TRANSFER AGENT
PIONEERING SERVICES CORPORATION
60 State Street
Boston, Massachusetts 02109
Telephone: 1-800-225-6292

SERVICES INFORMATION

If you would like information on the following, please call:
Existing and new accounts, prospectuses,
 applications, service forms and
 telephone transactions    .................................... 1-800-225-6292
FactFone(SM)
 Automated fund yields, automated prices
 and account information   .................................... 1-800-225-4321
Retirement plans  ............................................. 1-800-622-0176
Toll-free fax  ................................................ 1-800-225-4240
Telecommunications Device for the Deaf (TDD)    ............... 1-800-225-1997



<PAGE>

                          PIONEER TAX-FREE INCOME FUND
                                 60 State Street
                           Boston, Massachusetts 02109

                       STATEMENT OF ADDITIONAL INFORMATION

                       Class A, Class B and Class C Shares

                                          
                                 April 30, 1997

         This  Statement of  Additional  Information  is not a  Prospectus,  but
should be read in  conjunction  with the  Prospectus  dated  April  30,  1997 of
Pioneer  Tax-Free  Income Fund (the  "Fund").  A copy of the  Prospectus  can be
obtained free of charge by calling Shareholder  Services at 1-800-225-6292 or by
written request to the Fund at 60 State Street, Boston, Massachusetts 02109. The
most recent  Annual  Report to  Shareholders  is attached to this  Statement  of
Additional Information and is hereby incorporated by reference.
    

                                TABLE OF CONTENTS
                                                                     Page

 1.      Investment Objective and Policies............................2
 2.      Investment Restrictions......................................7
 3.      Management of the Fund.......................................9
 4.      Investment Adviser...........................................12
 5.      Underwriting Agreement and Distribution Plans................14
 6.      Shareholder Servicing/Transfer Agent.........................16
 7.      Custodian....................................................16
 8.      Principal Underwriter........................................17
 9.      Independent Public Accountant................................17
   
10.      Portfolio Transactions.......................................17
11.      Tax Status...................................................19
12.      Description of Shares........................................21
13.      Determination of Net Asset Value.............................22
14.      Systematic Withdrawal Plan...................................23
15.      Letter of Intent.............................................23
16.      Investment Results...........................................24
17.      General Information..........................................27
18.      Financial Statements.........................................27
         Appendix A - Description of Tax Exempt Bond Ratings..........28
         Appendix B - Comparative Performance Statistics..............35
         Appendix C - Other Pioneer Information.......................41
    


                THIS STATEMENT OF ADDITIONAL INFORMATION IS NOT A
                PROSPECTUS AND IS AUTHORIZED FOR DISTRIBUTION TO
                    PROSPECTIVE INVESTORS ONLY IF PRECEDED OR
                     ACCOMPANIED BY AN EFFECTIVE PROSPECTUS.


<PAGE>


1.       INVESTMENT OBJECTIVE AND POLICIES

   
         The Prospectus of Pioneer Tax-Free Income Fund (the "Fund")  identifies
the  investment  objective  and the principal  investment  policies of the Fund.
Other investment policies of the Fund are set forth below. Capitalized terms not
otherwise defined herein have the meaning given to them in the Prospectus.
    



         The  investment  objective  of the  Fund is to seek as high a level  of
income exempt from federal income tax as possible,  consistent with preservation
of  capital.  To  achieve  this  objective,  the Fund  intends  to  invest  in a
diversified portfolio of obligations issued by or on behalf of states,  counties
and  municipalities  of the United  States  ("U.S.") and their  authorities  and
political  subdivisions  ("Tax-Exempt Bonds"), the interest on which is excluded
from gross income for federal income tax purposes. All of the Fund's assets will
consist of: (1) Tax-Exempt  Bonds which are rated at the time of purchase within
the three highest grades assigned by Moody's Investors Service, Inc. ("Moody's")
(Aaa, Aa or A) or Standard & Poor's  Ratings  Group  ("S&P")  (AAA,  AA, A); (2)
temporary  investments  as  described  in the  Prospectus;  and (3) cash.  While
ratings at the time of purchase will determine which securities may be acquired,
a  subsequent  reduction  in rating  will not require the Fund to dispose of the
securities.  Investment in  lower-quality  securities  may provide higher yields
than  higher-rated  securities;  however,  the added risk of  investing in lower
quality  securities  might not be consistent with  preservation of capital.  The
ratings of Moody's  and S&P  represent  their  opinions as to the quality of the
Tax-Exempt Bonds which they undertake to rate. It should be emphasized, however,
that   ratings  are  general  and  are  not   absolute   standards  of  quality.
Consequently,  Tax-Exempt  Bonds with the same  maturity,  coupon and rating may
have different yields while Bonds of the same maturity and coupon with different
ratings may have the same yield.  There is no assurance the Fund will attain its
investment  objective.  For a description of the ratings of commercial paper and
the other debt securities permitted as temporary investments, see Appendix A.

Municipal Lease Obligations

         Municipal   lease   obligations   or  installment   purchase   contract
obligations   (collectively,   "lease   obligations")  have  special  risks  not
ordinarily  associated  with  other  Tax-Exempt  Bonds  (as  set  forth  in  the
Prospectus). Although lease obligations do not constitute general obligations of
the municipality for which the  municipality's  taxing power is pledged, a lease
obligation  ordinarily is backed by the  municipality's  covenant to budget for,
appropriate  and make the  payments  due under the lease  obligations.  However,
certain lease obligations contain "non-appropriation" clauses which provide that
the  municipality  has no  obligation  to make  lease  or  installment  purchase
payments in future  years  unless  money is  appropriated  for such purpose on a
yearly basis.  In addition to the  "non-appropriation"  risk,  these  securities
represent a relatively  new type of  financing  that has not yet  developed  the
depth  of  marketability  associated  with  more  conventional  bonds.  Although
"non-appropriation"  lease  obligations  are  secured  by the  leased  property,
disposition of the property in the event of foreclosure might prove difficult.
The Fund will seek to minimize these risks.

         In determining the liquidity of municipal lease obligations, the Fund's
officers,  under  guidelines  established by the Fund's Board of Trustees,  will
consider:  (1)  the  essential  nature  of the  leased  property;  and  (2)  the
likelihood that the municipality will discontinue  appropriating funding for the
leased  property  because the  property  is no longer  deemed  essential  to the
operation of the municipality.

         If leased  property is  determined  not to be essential in nature or if
there is a  likelihood  that the  municipality  will  discontinue  appropriating
funding,  then the  following  factors will also be  considered  in  determining
liquidity:

         (1) any relevant  factors  related to the general credit quality of the
municipality, which may include: (a) whether the lease can be canceled; (b) what
assurance there is that the assets represented by the lease can be sold; (c) the
strength  of the  lessee's  general  credit  (e.g.,  its  debt,  administrative,
economic and financial characteristics); and (d) the legal recourse in the event
of failure to appropriate.

         (2) any relevant factors related to the  marketability of the municipal
lease obligation  which may include:  (a) the frequency of trades and quotes for
the  obligation;  (b) the number of  dealers  willing  to  purchase  or sell the
obligation and the number of other potential purchasers;  (c) the willingness of
dealers to undertake to make a market in the  obligation;  and (d) the nature of
the marketplace trades,  including the time needed to dispose of the obligation,
the method of soliciting offers, and the mechanics of transfer.

Zero Coupon and Deferred Interest Bonds

         Tax-Exempt  Bonds in which the Fund may invest also include zero coupon
bonds and deferred interest bonds. Zero coupon bonds and deferred interest bonds
are debt obligations which are issued at a significant discount from face value.
While zero  coupon  bonds do not  require  the  periodic  payment  of  interest,
deferred interest bonds provide for a period of delay before the regular payment
of interest begins.  The discount  approximates the total amount of interest the
bonds will  accrue and  compound  over the period  until  maturity  or the first
interest  payment date at a rate of interest  reflecting  the market rate of the
security at the time of issuance.  Zero coupon bonds and deferred interest bonds
benefit the issuer by  mitigating  its need for cash to meet debt  service,  but
also  require a higher  rate of return to attract  investors  who are willing to
defer receipt of such cash. Such investments may experience  greater  volatility
in value than debt obligations which make regular payments of interest. The Fund
will accrue income on such investments for tax and accounting purposes, which is
distributable to shareholders. Since no cash is received at the time of accrual,
the Fund may be required to liquidate other portfolio  securities to satisfy its
distribution obligations.

Residual Interests in Municipal Securities

         Certain municipal  securities are divided into short-term and long-term
components. The short-term component has a long-term maturity, but pays interest
at a  short-term  rate that is reset by means of a "dutch  auction"  or  similar
method at specified  intervals  (typically 35 days). The long-term  component or
"residual  interest"  pays interest at a rate that is determined by  subtracting
the  interest  paid on the  short-term  component  from the  coupon  rate on the
municipal  securities  themselves.  Consequently,  the  interest  rate  paid  on
residual  interests will increase when short-term  interest rates are declining,
and will decrease when short-term  interest rates are increasing.  This interest
rate adjustment  formula results in the market value of residual interests being
significantly  more volatile than that of ordinary  municipal  securities.  In a
declining  interest rate  environment,  residual  interests can provide the Fund
with a means of increasing or maintaining the level of tax-exempt  interest paid
to  shareholders.  However,  because of the market  volatility  associated  with
residual  interests,  the Fund will not invest more than 10% of its total assets
in residual interests in municipal securities.

Options

         The  Fund  can  write  (sell)   "covered"   put  and  call  options  on
fixed-income  securities.  Call options  written by the Fund give the holder the
right to buy the underlying  securities  from the Fund at a fixed exercise price
up to a stated expiration date or, in the case of certain options, on such date.
Put options written by the Fund give the holder the right to sell the securities
to the Fund  during  the term of the  option at a fixed  exercise  price up to a
stated  expiration date or, in the case of certain  options,  on such date. Call
options are  "covered"  by the Fund,  for example,  when it owns the  underlying
securities  which the option  holder has the right to purchase,  and put options
are  "covered" by the Fund,  for example,  when it has  established a segregated
account of cash or short-term money market  instruments  which can be liquidated
promptly  to satisfy  any  obligation  of the Fund to  purchase  the  underlying
securities.  The Fund will  receive a premium from writing a put or call option,
which  increases  the  Fund's  gross  income  in the event  the  option  expires
unexercised or is closed out at a profit.

         By writing a call  option,  the Fund limits its  opportunity  to profit
from any  increase  in the market  value of the  underlying  security  above the
exercise price of the option. By writing a put option, the Fund assumes the risk
that it may be required  to purchase  the  underlying  security  for an exercise
price  higher  than its then  current  market  value,  resulting  in a potential
capital loss unless the security subsequently appreciates in value.

         The Fund could  terminate  an option that it has  written  prior to its
expiration  by  entering  into a  "closing  purchase  transaction"  in  which it
purchases an option having the same terms as the option written. It is possible,
however, that illiquidity in the options markets may make it difficult from time
to time for the Fund to close out its written option  positions.  The Fund could
also purchase put or call options in  anticipation  of changes in interest rates
which  may  adversely  affect  the  value  of its  portfolio  or the  prices  of
securities that the Fund wants to purchase at a later date. The premium paid for
a put or call option plus any transaction costs will reduce the benefit, if any,
realized by the Fund upon exercise of the option,  and,  unless the price of the
underlying security changes sufficiently, the option may expire without value to
the Fund.

         The Fund intends to write and purchase options on securities  primarily
for hedging purposes and also in an effort to increase  current income.  Options
on securities  that are written or purchased by the Fund will be entered into on
U.S.  securities  exchanges  regulated by the Securities and Exchange Commission
("SEC")  and  in  the  over-the-counter  market.  Over-the-counter  transactions
involve certain risks which may not be present in an exchange  environment.  The
staff of the SEC has taken the position that purchased  over-the-counter options
and assets used to cover  written  over-the-counter  options are  illiquid  and,
therefore,  together  with other  illiquid  securities,  cannot  exceed 15% of a
Fund's net assets.

Futures Contracts and Options on Futures Contracts

         To hedge against changes in interest rates and securities prices or for
non-hedging  purposes,  the Fund may purchase and write (sell)  various kinds of
futures contracts,  and purchase and write (sell) call and put options on any of
such futures  contracts.  The Fund may also enter into closing purchase and sale
transactions  with respect to any of such  contracts  and  options.  The futures
contracts  may  be  based  on  various  securities  (such  as  U.S.   Government
securities), securities indices and other financial instruments and indices. The
Fund will  engage in futures  and  related  options  transactions  for bona fide
hedging and  non-hedging  purposes as  described  below.  All futures  contracts
entered  into by the Fund are traded on U.S.  exchanges  or boards of trade that
are licensed and  regulated by the Commodity  Futures  Trading  Commission  (the
"CFTC") or on foreign exchanges.

         Futures Contracts.  A futures contract may generally be described as an
agreement between two parties to buy and sell particular  financial  instruments
for an agreed  price  during a  designated  month (or to deliver  the final cash
settlement  price,  in the case of a contract  relating to an index or otherwise
not calling for physical delivery at the end of trading in the contract).

         When interest  rates are rising or securities  prices are falling,  the
Fund can  seek to  offset  a  decline  in the  value  of its  current  portfolio
securities  through  the sale of  futures  contracts.  When  interest  rates are
falling or  securities  prices are rising,  the Fund,  through  the  purchase of
futures contracts, can attempt to secure better rates or prices than might later
be available in the market when it effects anticipated purchases.

         Positions  taken  in the  futures  markets  are  not  normally  held to
maturity but are instead liquidated  through  offsetting  transactions which may
result  in a  profit  or a loss.  A  clearing  corporation  associated  with the
exchange on which futures on  securities  are traded  guarantees  that, if still
open, the sale or purchase will be performed on the settlement date.

         Hedging  Strategies.  Hedging,  by use of futures  contracts,  seeks to
establish  with  more  certainty  the  effective  price  and rate of  return  on
portfolio  securities and securities  that the Fund owns or proposes to acquire.
The Fund may,  for  example,  take a "short"  position in the futures  market by
selling  futures  contracts  in order to hedge  against an  anticipated  rise in
interest  rates that would  adversely  affect the value of the Fund's  portfolio
securities. Such futures contracts may include contracts for the future delivery
of securities  held by the Fund or securities  with  characteristics  similar to
those of the  Fund's  portfolio  securities.  If, in the  opinion  of the Fund's
investment  adviser,  there is a sufficient degree of correlation  between price
trends for the Fund's portfolio  securities and futures contracts based on other
financial  instruments,  securities indices or other indices,  the Fund may also
enter into such  futures  contracts  as part of its hedging  strategy.  Although
under some  circumstances  prices of securities  in the Fund's  portfolio may be
more or  less  volatile  than  prices  of such  futures  contracts,  the  Fund's
investment  adviser  will  attempt to  estimate  the  extent of this  volatility
difference based on historical patterns and compensate for any such differential
by having the Fund enter into a greater or lesser number of futures contracts or
by attempting  to achieve only a partial  hedge against price changes  affecting
the Fund's securities  portfolio.  When hedging of this character is successful,
any  depreciation  in the value of portfolio  securities  will be  substantially
offset by appreciation in the value of the futures position.  On the other hand,
any unanticipated  appreciation in the value of the Fund's portfolio  securities
would be substantially offset by a decline in the value of the futures position.

         On other  occasions,  the Fund may take a "long" position by purchasing
futures  contracts.  This would be done, for example,  when the Fund anticipates
the subsequent purchase of particular securities when it has the necessary cash,
but expects the prices or interest rates then available in the applicable market
to be less favorable than prices or rates that are currently available.

         Options on Futures  Contracts.  The acquisition of put and call options
on futures contracts will give the Fund the right (but not the obligation) for a
specified  price to sell or to purchase,  respectively,  the underlying  futures
contract at any time during the option period.  As the purchaser of an option on
a futures  contract,  the Fund  obtains the  benefit of the futures  position if
prices move in a favorable direction but limits its risk of loss in the event of
an unfavorable price movement to the loss of the premium and transaction costs.

         The writing of a call option on a futures contract  generates a premium
which may  partially  offset a decline  in the value of the  Fund's  assets.  By
writing a call option, the Fund becomes obligated,  in exchange for the premium,
to sell (if the option is exercised) a futures contract,  which may have a value
higher than the  exercise  price.  Conversely,  the writing of a put option on a
futures  contract  generates a premium which may partially offset an increase in
the price of  securities  that the Fund intends to purchase.  However,  the Fund
becomes  obligated to purchase (if the option is  exercised) a futures  contract
which may have a value lower than the exercise price. Thus, the loss incurred by
the Fund in writing  options on futures is potentially  unlimited and may exceed
the amount of the premium  received.  The Fund will incur  transaction  costs in
connection with the writing of options on futures.

   
         The holder or writer of an option on a futures  contract may  terminate
its  position  by  selling  or  purchasing  an  offsetting  option  on the  same
securities..  There  is no  guarantee  that  such  closing  transactions  can be
effected.  The  Fund's  ability to  establish  and close out  positions  on such
options will be subject to the development and maintenance of a liquid market.
    

         The Fund may use options on futures  contracts for bona fide hedging or
non-hedging purposes as discussed below.

         Other  Considerations.  The Fund will  engage in  futures  and  related
options  transactions  only for bona fide  hedging or  non-hedging  purposes  in
accordance  with CFTC  regulations  which  permit  principals  of an  investment
company  registered  under the  Investment  Company Act of 1940, as amended (the
"1940 Act"),  to engage in such  transactions  without  registering as commodity
pool  operators.  The Fund is not  permitted  to engage in  speculative  futures
trading.  The Fund will  determine  that the price  fluctuations  in the futures
contracts  and options on futures used for hedging  purposes  are  substantially
related to price fluctuations in securities held by the Fund or which it expects
to purchase.  Except as stated below,  the Fund's futures  transactions  will be
entered into for traditional hedging purposes -- i.e., futures contracts will be
sold to protect against a decline in the price of securities that the Fund owns,
or futures  contracts  will be purchased to protect the Fund against an increase
in the price of securities  it intends to purchase.  As evidence of this hedging
intent,  the Fund expects that on 75% or more of the occasions on which it takes
a long futures or option position (involving the purchase of futures contracts),
the  Fund  will  have  purchased,  or  will  be in the  process  of  purchasing,
equivalent amounts of related securities in the cash market at the time when the
futures or option position is closed out. However,  in particular cases, when it
is economically  advantageous for the Fund to do so, a long futures position may
be  terminated  or an option may expire  without the  corresponding  purchase of
securities or other assets.

   
         As an  alternative  to literal  compliance  with the bona fide  hedging
definition,  a CFTC  regulation  permits  the  Fund to elect  to  comply  with a
different test, under which the sum of the amounts of initial margin deposits on
the  Fund's  existing  non-hedging  futures  contracts  and  premiums  paid  for
non-hedging  options on futures  (net of the  amount the  positions  are "in the
money")  would not exceed 5% of the market  value of the Fund's net assets.  The
Fund will engage in  transactions  in futures  contracts and options only to the
extent such  transactions  are consistent with the  requirements of the Internal
Revenue Code of 1986, as amended (the "Code"), for maintaining its qualification
as a regulated investment company for federal income tax purposes.
    

         Transaction costs associated with futures contracts and related options
involve  brokerage costs,  require margin deposits and, in the case of contracts
and  options  obligating  the Fund to purchase  securities,  require the Fund to
segregate assets to cover such contracts and options.

         While  transactions  in futures  contracts  and  options on futures may
reduce certain risks, such  transactions  themselves entail certain other risks.
Thus, while the Fund may benefit from the use of futures and options on futures,
unanticipated  changes in interest  rates or  securities  prices may result in a
poorer  overall  performance  for the Fund than if it had not  entered  into any
futures  contracts  or  options  transactions.  In  the  event  of an  imperfect
correlation  between  a  futures  position  and a  portfolio  position  which is
intended to be  protected,  the desired  protection  may not be obtained and the
Fund may be exposed to risk of loss.  The only  futures  contracts  available to
hedge the Fund's  portfolio are various futures on U.S.  Government  securities,
futures on a municipal securities index and stock index futures.

Tax-Exempt Bonds

         Tax-Exempt  Bonds include debt  obligations  issued to obtain funds for
various public  purposes,  including the  construction of a wide range of public
facilities  such  as  airports,  bridges,  highways,  housing,  hospitals,  mass
transportation,  schools,  streets,  and  water and sewer  works.  Other  public
purposes  for which  Tax-Exempt  Bonds may be issued  include the  refunding  of
outstanding obligations, obtaining funds for general operating expenses, and the
obtaining  of funds to loan to other  public  institutions  and  facilities.  In
addition,  certain types of industrial development bonds are, or have been under
prior  law,  issued by or on behalf of  public  authorities  to obtain  funds to
provide privately-operated housing facilities, sports facilities,  convention or
trade show facilities,  airports, mass transit, port or parking facilities,  air
or water pollution  control  facilities,  and certain local facilities for water
supply, gas,  electricity,  or sewage or solid waste disposal.  Such obligations
are  included  within the term  Tax-Exempt  Bonds if the  interest  paid thereon
qualifies as excluded from gross income for federal  income tax purposes.  Other
types of industrial  development  bonds,  the proceeds of which are used for the
construction,  equipment, repair or improvement of privately operated industrial
or commercial facilities,  may constitute Tax-Exempt Bonds, although the current
federal tax laws place substantial limitations on the size of such issues.

         The two  principal  classifications  of  Tax-Exempt  Bonds are "general
obligation" and "revenue"  bonds.  General  obligation  bonds are secured by the
issuer's  pledge of its  faith,  credit  and  taxing  power for the  payment  of
principal and interest. Revenue bonds are payable only from the revenues derived
from a particular  facility or class of facilities  or, in some cases,  from the
proceeds  of a  special  excise or other  specific  revenue  source.  Industrial
development bonds which are Tax-Exempt Bonds are in most cases revenue bonds and
do not  generally  constitute  the  pledge of the  credit of the  issuer of such
bonds.  There are, of course,  variations in security of Tax-Exempt  Bonds, both
within a particular  classification  and between  classifications,  depending on
numerous factors.

   
         The Fund may invest more than 25% of its total assets in  securities of
companies in the gas, electric,  telephone,  sewer and water, public and private
utility sectors of the municipal bond market.  In view of this, an investment in
the Fund should be made with an  understanding of the  characteristics  of these
economic  sectors and the  potential  risks of such an  investment.  Sector-wide
problems  include  the  effects  of  fluctuating  economic  conditions,   energy
conservation practices on levels of usage,  difficulties in obtaining timely and
adequate rate relief,  compliance  with  environmental  regulations,  increasing
capital  expenditures  and  uncertainties  with respect to fuel  availability at
reasonable  prices.  The Fund does not consider  broader economic sectors of the
municipal bond market such as the utilities  sector to be a single  indusrty and
will not  purchase  securities  if more  than 25% of its total  assets  would be
invested in any one industry. For purposes of this limitation, Tax-Exempt Bonds,
except  those  issued  for  the  benefit  of  non-governmental  users,  are  not
considered  to be part of an  industry.  The Fund may  invest 25% or more of its
total  assets in  Tax-Exempt  Bonds of issuers in any one state or it may invest
25% or more of its total assets in industrial development bonds.
    

         The yields on  Tax-Exempt  Bonds are dependent on a variety of factors,
including general money market conditions,  general conditions of the Tax-Exempt
Bond market, the size of a particular offering,  the maturity of the obligation,
and the rating of the issue. The value of outstanding Tax-Exempt Bonds will vary
as a result of changing  evaluations of the ability of their issuers to meet the
interest  and  principal  payments.  Such values will also change in response to
changes in the interest rates payable on new issues of Tax-Exempt Bonds;  should
such interest rates rise, the values of outstanding bonds,  including those held
in the Fund's  portfolio,  will decline and (if  purchased at principal  amount)
would sell at a  discount,  and,  if such  interest  rates  fall,  the values of
outstanding  bonds will  increase and (if  purchased at principal  amount) would
sell at a  premium.  Changes  in the value of the  Tax-Exempt  Bonds held in the
Fund's  portfolio  arising from these or other factors will cause changes in the
net asset value per share of the Fund.

         From time to time,  proposals have been introduced  before Congress for
the purpose of restricting  or eliminating  the federal income tax exemption for
interest on Tax-Exempt  Bonds. It can be expected that similar  proposals may be
introduced in the future.  If such a proposal were enacted,  the availability of
Tax-Exempt  Bonds  for  investment  by the  Fund  and the  value  of the  Fund's
portfolio  would be  affected.  Additionally,  the  Fund  would  reevaluate  its
investment  objective and policies and consider  changes in the structure of the
Fund.

         The Fund will limit  portfolio  turnover to the extent  practicable and
consistent with its investment objective and policies.  While it does not intend
to engage in short-term  trading,  the Fund will not preclude itself from taking
advantage of short-term  trends and yield disparities that might occur from time
to time,  but not to the extent that such trading  would  jeopardize  the Fund's
qualification as a regulated  investment company under Subchapter M of the Code.
A  higher  portfolio  turnover  rate  will  result  in  correspondingly   higher
transaction costs.

2.       INVESTMENT RESTRICTIONS


   
         Fundamental  Investment  Restrictions.  The  Fund has  adopted  certain
additional  investment  restrictions  which  may  not  be  changed  without  the
affirmative  vote  of the  holders  of a  "majority  of the  outstanding  voting
securities" ( as defined in the 1940 Act) of the Fund. The Fund may not:
    


1. Purchase any security  (other than  obligations of the U.S.  Government,  its
agencies or  instrumentalities),  if as a result: (a) more than 25% of the value
of the Fund's total assets  would then be invested in  securities  of any single
issuer;  or (b) as to 75% of the value of the Fund's total assets,  more than 5%
of the value of the Fund's total assets would then be invested in  securities of
any single issuer. For the purpose of this limitation, the Fund will regard each
state and each political  subdivision,  agency or  instrumentality of such state
and each  multi-state  agency  of which  such  state is a member  as a  separate
issuer;

2. Borrow money,  except from a bank for temporary or emergency purposes and not
for  investment  purposes,  and then only in an amount not  exceeding  5% of the
value of the Fund's total assets at the time of borrowing;

3. Pledge, mortgage or hypothecate its assets, except that, to secure borrowings
permitted by subparagraph  (2) above, it may pledge  securities  having a market
value at the time of pledge not  exceeding  5% of the value of the Fund's  total
assets;

4. Knowingly  purchase or otherwise  acquire any securities which are subject to
legal or contractual restrictions on resale or which are not readily marketable,
or purchase the securities of any other investment  company,  except that it may
make  purchases of  securities of  investment  companies in accordance  with its
investment  objective,  policies,  and  restrictions  or as  part  of a  merger,
consolidation or acquisition of assets;

5. Underwrite any issue of securities, except in connection with the purchase of
securities  in  accordance   with  its   investment   objective,   policies  and
limitations,  or  participate  on a  joint  or  joint-and-several  basis  in any
securities trading account;

6. Purchase or sell real estate (or real estate limited partnerships),  but this
shall not prevent the Fund from investing in Tax-Exempt Bonds or other permitted
obligations secured by real estate or interests therein;

7. Purchase or sell commodities or commodity contracts except options, financial
futures  or  options on  financial  futures  contracts  in  accordance  with its
investment objective, policies, and restrictions, or invest in oil, gas or other
mineral leases,  exploration or development programs, or write or purchase puts,
calls, straddles, spreads or any combination thereof;

8. Make loans, except through the purchase of securities,  including  repurchase
agreements,   in  accordance  with  its  investment   objective,   policies  and
limitations;  9. Make short sales of  securities  or purchase any  securities on
margin, except for such short-term credits as are necessary for the clearance of
transactions and margin payments in connection with options,  financial  futures
contracts and options on financial futures contracts; or

10. Purchase or retain the securities of any issuer other than the securities of
the Fund, if, to the Fund's knowledge,  those officers and trustees of the Fund,
or  of  the  investment   adviser  or  underwriter,   who  own  individually  or
beneficially  more than 1/2 of 1% of the  outstanding  securities of such issuer
together own beneficially more than 5% of such outstanding securities.

         If a percentage  restriction on investment or utilization of assets set
forth in any of the above is adhered  to at the time an  investment  is made,  a
later change in percentage  resulting  from  changing  values or a change in the
rating of a portfolio security will not be considered a violation of policy.


<PAGE>



   
2.       MANAGEMENT OF THE FUND

         The  Fund's  Board of  Trustees  provides  broad  supervision  over the
affairs of the Fund.  The  officers of the Fund are  responsible  for the Fund's
operations.  The Trustees and  executive  officers of the Fund are listed below,
together  with  their  principal  occupations  during  the past five  years.  An
asterisk  indicates those Trustees who are interested persons of the Fund within
the meaning of the 1940 Act.

JOHN F. COGAN,  JR.*,  Chairman of the Board,  President and Trustee,  DOB: June
1926  President,  Chief  Executive  Officer and a Director of The Pioneer Group,
Inc.  ("PGI");  Chairman  and a Director of  Pioneering  Management  Corporation
("PMC") and Pioneer  Funds  Distributor,  Inc.  ("PFD");  Director of Pioneering
Services   Corporation   ("PSC"),   Pioneer  Capital   Corporation  ("PCC")  and
Forest-Starma  (a Russian  timber  joint  venture);  President  and  Director of
Pioneer Plans Corporation  ("PPC"),  Pioneer Investment Corp.  ("PIC"),  Pioneer
Metals and Technology,  Inc. ("PMT"),  Pioneer  International  Corp.  ("Pintl"),
Luscina, Inc., Pioneer First Russia, Inc. ("First Russia"),  Pioneer Omega, Inc.
("Omega");  and Theta Enterprises,  Inc.;  Chairman of the Board and Director of
Pioneer Goldfields Limited ("PGL") and Teberebie Goldfields Limited; Chairman of
the Supervisory Board of Pioneer Fonds Marketing,  GmbH ("Pioneer GmbH"); Member
of the Supervisory  Board of Pioneer First Polish Trust Fund Joint Stock Company
("PFPT");  Chairman,  President and Trustee of all of the Pioneer  mutual funds;
and Partner, Hale and Dorr LLP (counsel to the Fund).

RICHARD H. EGDAHL, M.D., Trustee,  DOB: December 1926
Boston University Health Policy Institute, 53 Bay State Rd., Boston, MA  02115
       Professor  of  Management,   Boston   University  School  of  Management;
Professor of Public Health, Boston University School of Public Health; Professor
of Surgery,  Boston University School of Medicine;  Director,  Boston University
Health Policy  Institute and Boston  University  Medical Center;  Executive Vice
President and Vice  Chairman of the Board,  University  Hospital;  Academic Vice
President for Health Affairs,  Boston  University;  Director,  Essex  Investment
Management  Company,  Inc.  (investment  adviser),  Health Payment Review,  Inc.
(health care  containment  software firm),  Mediplex Group,  Inc.  (nursing care
facilities firm),  Peer Review Analysis,  Inc. (health care facilities firm) and
Springer-Verlag  New  York,  Inc.  (publisher);   Honorary  Trustee,  Franciscan
Children's Hospital; and Trustee of all of the Pioneer mutual funds.

MARGARET B.W. GRAHAM, Trustee,  DOB:  May 1947
The Keep, P.O. Box 110. Little Deer Isle, ME  04650
       Founding  Director,  Winthrop Group,  Inc (consulting  firm);  Manager of
Research  Operations,  Xerox  Palo  Alto  Research  Center,  from  1991 to 1994;
Professor  of  Operations  Management  and  Management  of  Technology,   Boston
University School of Management ("BUSM"),  from 1989 to 1993; and Trustee of all
of the Pioneer mutual funds, except Pioneer Variable Contracts Trust.

JOHN W. KENDRICK, Trustee,  DOB:  July 1917
6363 Waterway Drive, Falls Church, VA  22044
       Professor  Emeritus and Adjunct Scholar,  George  Washington  University;
Economic  Consultant and Director,  American  Productivity  and Quality  Center;
American Enterprise  Institute;  and Trustee of all of the Pioneer mutual funds,
except Pioneer Variable Contracts Trust.

MARGUERITE A. PIRET, Trustee,  DOB:  May 1948
One Boston Place, Suite 2635, Boston, MA 02108
President, Newbury, Piret & Company, Inc. (merchant banking firm) and Trustee of
all of the Pioneer mutual funds.

DAVID D. TRIPPLE*, Trustee and Executive Vice President,  DOB:  February 1944
       Executive  Vice  President  and  a  Director  of  PGI;  President,  Chief
Investment  Officer and a Director of PMC;  Director of PFD,  PCC,  PIC,  PIntl,
First Russia,  Omega and Pioneer SBIC Corporation;  and Executive Vice President
and Trustee of all of the Pioneer mutual funds.

STEPHEN K. WEST, Trustee,  DOB: September 1928
125 Broad Street, New York, NY  10004
       Partner,  Sullivan & Cromwell  (law firm);  Trustee,  The Winthrop  Focus
Funds (mutual funds) and Trustee of all of the Pioneer mutual funds.

JOHN WINTHROP, Trustee,  DOB:  June 1936
One North Adgers Wharf, Charleston, SC  29401
President,  John Winthrop & Co., Inc. (private investment firm); Director of NUI
Corp.;  Trustee of Alliance Capital Reserves,  Alliance  Government Reserves and
Alliance Tax Exempt  Reserves;  and Trustee of all of the Pioneer  mutual funds,
except Pioneer Variable Contracts Trust.
WILLIAM H. KEOUGH, Treasurer,  DOB:  April 1937
       Senior Vice  President,  Chief  Financial  Officer and  Treasurer of PGI;
Treasurer of PFD, PMC, PSC, PCC, PIC, PIntl,  PMT, PGL, First Russia,  Omega and
Pioneer SBIC Corporation; Treasurer and Director of PPC; and Treasurer of all of
the Pioneer mutual funds.


JOSEPH P. BARRI, Secretary, DOB: August 1946
       Secretary of PGI, PMC, PPC, PIC, PIntl, PMT, First Russia, Omega and PCC;
Clerk of PFD and PSC;  Partner,  Hale and Dorr LLP  (counsel  to the Fund);  and
Secretary of all of the Pioneer mutual funds.

ERIC W. RECKARD, Assistant Treasurer, DOB:  June 1956
       Manager of Fund  Accounting  of PMC since May 1994;  Manager of Auditing,
Compliance  and  Business  Analysis  for PGI  prior to May 1994;  and  Assistant
Treasurer of all of the Pioneer mutual funds.

ROBERT P. NAULT, Assistant Secretary, DOB:   March 1964
       General  Counsel and  Assistant  Secretary  of PGI since 1995;  Assistant
Secretary of PMC, PIntl, PGL, First Russia,  Omega and all of the Pioneer mutual
funds;  Assistant  Clerk  of PFD and  PSC;  and  formerly  of Hale  and Dorr LLP
(counsel to the Fund) where he most recently served as junior partner.

MARK L. WINTER, Vice President,  DOB:  May 1951
       Vice  President  of the Fund since  1993;  formerly,  Portfolio  Manager,
Mutual of Omaha Fund Management Company (until 1993.)

         The Fund's  Agreement and  Declaration  of Trust (the  "Declaration  of
Trust")  provides that the holders of two-thirds of its  outstanding  shares may
vote to  remove  a  Trustee  of the Fund at any  meeting  of  shareholders.  See
"Description of Shares" below.  The business address of all officers is 60 State
Street, Boston, Massachusetts 02109.

         All of the  outstanding  capital  stock of PFD,  PMC and PSC is  owned,
directly or indirectly, by PGI, a publicly-owned Delaware corporation.  PMC, the
Fund's  investment  adviser,  serves as the  investment  adviser for the Pioneer
mutual funds listed below and manages the  investments of certain  institutional
accounts.

The table below lists all the Pioneer U. S. mutual  funds  currently  offered to
the public and the investment adviser and principal underwriter for each fund.

                                         Investment           Principal
Fund Name                                  Adviser           Underwriter

Pioneer International Growth Fund         PMC                 PFD
Pioneer Europe Fund                       PMC                 PFD
Pioneer World Equity Fund                 PMC                 PFD
Pioneer Emerging Markets Fund             PMC                 PFD
Pioneer India Fund                        PMC                 PFD
Pioneer Capital Growth Fund               PMC                 PFD
Pioneer Mid-Cap Fund                      PMC                 PFD
Pioneer Growth Shares                     PMC                 PFD
Pioneer Small Company Fund                PMC                 PFD
Pioneer Micro-Cap Fund                    PMC                 PFD
Pioneer Gold Shares                       PMC                 PFD
Pioneer Equity-Income Fund                PMC                 PFD
Pioneer Balanced Fund                     PMC                 PFD
Pioneer Fund                              PMC                 PFD
Pioneer II                                PMC                 PFD
Pioneer Real Estate Shares                PMC                 PFD
Pioneer Short-Term Income Trust           PMC                 PFD
Pioneer America Income Trust              PMC                 PFD
Pioneer Bond Fund                         PMC                 PFD
Pioneer Intermediate Tax-Free Fund        PMC                 PFD
Pioneer Tax-Free Income Fund              PMC                 PFD
Pioneer Cash Reserves Fund                PMC                 PFD
Pioneer Interest Shares                   PMC               Note 1
Pioneer Variable Contracts Trust          PMC               Note 2

Note 1 This fund is a closed-end fund.

Note 2 This is a  series  of  eight  separate  portfolios  designed  to  provide
investment  vehicles  for the  variable  annuity  and  variable  life  insurance
contracts of various insurance companies or for certain qualified pension plans.




         To the  knowledge of the Fund,  no officer or Trustee of the Fund owned
5% or more of the  issued and  outstanding  shares of PGI as of the date of this
Statement  of   Additional   Information,   except  Mr.  Cogan  who  then  owned
approximately 14% of such shares. As of the date of this Statement of Additional
Information,  the Trustees and  Officers of the Fund owned  beneficially  in the
aggregate  less than 1% of the  outstanding  shares of the Fund. As of such date
Merrill Lynch Pierce Fenner & Smith Inc., for the sole benefit of its customers,
4800  Deer  Lake  Drive  East  3rd  Fl,   Jacksonville,   FL  32246-6484   owned
approximately  15.82%  (64,491.000)  of the  outstanding  Class B shares;  Smith
Barney Inc., 388 Greenwich Street,  New York, NY 10013-2375 owned  approximately
24.33%   (16,478.344)  of  the  outstanding   Class  C  shares;   Pioneer  Funds
Distributor,  Inc., 60 State Street,  Boston, MA 02109-1800 owned  approximately
12.91%  (8,741.613) of the  outstanding  Class C shares;  Smith Barney Inc., 388
Greenwich Street, New York, NY 10013-2375 owned approximately 10.08% (6,829.752)
of the  outstanding  Class C shares;  Edward and Laverne  Gossett,  3043 Arizona
Drive,  Bismark,ND  58501-5313  owned  approximately  9.67%  (6,547.659)  of the
outstanding  Class C shares;  Gordon L. Cochran and Daiharu Yokoyama JT TEN, 469
Ena  Road  Apt.  1912,   Honolulu,   HI  96815-1724  owned  approximately  7.49%
(5,071.998)  of the  outstanding  Class C  shares;  Lillie  F.  Jackson,  403 W.
Interstate  Ave.  Apt. D,  Bismark,  ND  58501-1029  owned  approximately  6.68%
(4,522.557) of the outstanding Class C shares;  Smith Barney Inc., 388 Greenwich
Street,  New York, NY 10013-2375 owned  approximately  6.29%  (4,261.678) of the
outstanding Class C shares.





Compensation of Officers and Trustees
                  The  Fund  pays  no  salaries  or  compensation  to any of its
officers.  The Fund will pay an annual  trustee's fee to each Trustee who is not
affiliated  with PMC, PGI, PFD or PSC consisting of two  components:  (a) a base
fee of $500 and (b) a variable  fee,  calculated on the basis of the average net
assets of the Fund. In addition,  the Fund will pay a per meeting fee of $100 to
each Trustee who is not affiliated with PMC, PGI, PFD or PSC. The Fund also pays
an annual  committee  participation  fee to  trustees  who serve as  members  of
committees  established  to act on behalf of one or more of the  Pioneer  mutual
funds.  Committee  fees are  allocated  to the Fund on the  basis of the  Fund's
average net assets.  Each Trustee who is a member of the Audit Committee for the
Pioneer mutual funds receives an annual fee equal to 10% of the aggregate annual
trustee's fee, except the Committee  Chair who receives an annual  trustee's fee
equal to 20% of the  aggregate  annual  trustee's  fee.  Members of the  Pricing
Committee for the Pioneer  mutual funds,  as well as any other  committee  which
renders  material  functional  services to the Board of Trustees for the Pioneer
mutual  funds,  receive an annual fee equal to 5% of the annual  trustee's  fee,
except the Committee Chair who receives an annual  trustee's fee equal to 10% of
the annual trustee's fee. Any such fees paid to affiliates or interested persons
of  PGI,  PMC,  PFD or PSC are  reimbursed  to the  Fund  under  its  Management
Contract.     

The following table provides information  regarding the compensation paid by the
Fund and other Pioneer mutual funds to the Trustees for their services.
<TABLE>
<CAPTION>
<S>                                              <C>                   <C>                          <C>


                                                                   Pension or                    Total
                                                                   Retirement                Compensation
                                                                    Benefits                 from the Fund
                                            Aggregate                Accrued                 and all other
                                          Compensation             as Part of                   Pioneer
TrusteeFrom the Fund*                  the Fund's Expenses       Mutual Funds**

   
John F. Cogan, Jr.                            $   500                   $0                     $11,083
Richard H. Egdahl, M.D.                        $2,406                   $0                     $59,858
Margaret B.W. Graham                           $2,506                   $0                     $59,858
John W. Kendrick                               $2,506                   $0                     $59,858
Marguerite A. Piret                            $3,164                   $0                     $79,842
David D. Tripple                              $   500                   $0                     $11,083
Stephen K. West                                $2,731                   $0                     $67,850
John Winthrop                                  $2,740                   $0                     $66,442

  Totals                                      $17,053                   $0                    $415,874
                                              =======                   ==                    ========
</TABLE>


 * As of December  31,  1996,  the Fund's  fiscal year end.** As of December 31,
1996 (calendar year end for all 21 Pioneer mutual funds).4.  INVESTMENT  ADVISER
As stated in the Prospectus, PMC, 60 State Street, Boston, Massachusetts, serves
as the Fund's investment  adviser.  PMC became the Fund's investment  adviser on
December 1, 1993.  Prior to that date,  Mutual of Omaha Fund Management  Company
("FMC") served as the Fund's  investment  adviser.  The  management  contract is
renewable  annually  by the vote of a majority  of the Board of  Trustees of the
Fund  (including  a majority of the Board of Trustees who are not parties to the
contract or interested  persons of any such parties) cast in person at a meeting
called for the purpose of voting on such renewal.  This  contract  terminates if
assigned and may be  terminated  without  penalty by either party by vote of its
Board of Trustees or a majority of its  outstanding  voting  securities  and the
giving of 60 days' written notice.     

         As compensation for its management services and expenses incurred,  PMC
is entitled to a management  fee at the following  rates per annum of the Fund's
average  daily  net  assets.  The fee is  computed  and  accrued  daily and paid
monthly.

Net Assets                                       Annual Rate

For assets up to $250,000,000                        0.50%
For assets in excess of $250,000,000
  to $300,000,000                                    0.48%
Over $300,000,000                                    0.45%

         PMC agreed that until  December  1, 1995,  its fee would not exceed the
fee that would have been payable  under the previous  management  contract  with
FMC,  without  giving  effect to any  expense  limitation.  Under  the  previous
management contract with FMC, which was terminated on December 1, 1993, the Fund
paid FMC a management  fee at an annual rate equal to the following  percentages
of the Fund's average daily net assets:

Net Assets                                      Annual Rate

For assets up to and including $100,000,000      .50%
For assets in excess of $100,000,000
  to $200,000,000                                .48%
For assets in excess of $200,000,000
  to $300,000,000                                .46%
For assets in excess of $300,000,000
  to $400,000,000                                .44%
For assets in excess of $400,000,000
  to $500,000,000                                .42%
For assets of $500,000,000 and over              .40%

         .

   
During the fiscal years ended December 31, 1994, December 31, 1995, and December
31,  1996,  the Fund  incurred  management  fees of  $2,226,099,$2,153,083,  and
$2,196,607, respectively.     

5.       UNDERWRITING AGREEMENT AND DISTRIBUTION PLANS

         The Fund has  entered  into an  Underwriting  Agreement  with PFD.  The
Underwriting  Agreement will continue from year to year if annually  approved by
the Trustees.  The  Underwriting  Agreement  provides that PFD will bear certain
distribution expenses not borne by the Fund.

         PFD  bears all  expenses  it incurs  in  providing  services  under the
Underwriting Agreement.  Such expenses include compensation to its employees and
representatives  and to securities  dealers for  distribution  related  services
performed for the Fund.  PFD also pays certain  expenses in connection  with the
distribution of the Fund's shares, including the cost of preparing, printing and
distributing  advertising or promotional materials, and the cost of printing and
distributing prospectuses and supplements to prospective shareholders.  The Fund
bears the cost of registering its shares under federal and state securities law.
The  Fund  and  PFD  have  agreed  to  indemnify  each  other  against   certain
liabilities, including liabilities under the Securities Act of 1933, as amended.
Under the  Underwriting  Agreement,  PFD will use its best  efforts in rendering
services to the Fund.

         The Fund has  adopted a plan of  distribution  pursuant  to Rule  12b-1
under the 1940 Act with  respect  to each Class of shares  (the  "Class A Plan",
"Class B Plan" and "Class C Plan") (together, the "Plans").

Class A Plan

   
         Pursuant  to the  Class A Plan,  the  Fund  may  reimburse  PFD for its
expenditures in financing any activity  primarily intended to result in the sale
of the  Class A  shares.  Certain  categories  of such  expenditures  have  been
approved by the Board of Trustees and are set forth in the Prospectus  under the
caption  "Distribution  Plans." The expenses of the Fund pursuant to the Class A
Plan are accrued on a fiscal year basis and may not exceed,  with respect to the
Class A shares,  the annual rate of 0.25% of the Fund's average daily net assets
attributable to Class A shares.     

Class B Plan

   
         The Class B Plan  provides  that the Fund shall pay PFD,  as the Fund's
distributor for its Class B shares, a daily  distribution fee equal on an annual
basis to 0.75% of the Fund's  average daily net assets  attributable  to Class B
shares and will pay PFD a service fee equal to 0.25% of the Fund's average daily
net  assets  attributable  to  Class B  shares  (which  PFD  will in turn pay to
securities dealers which enter into a sellingagreement  with PFD at a rate of up
to 0.25% of the Fund's average daily net assets  attributable  to Class B shares
owned by investors  for whom that  securities  dealer is the holder or dealer of
record).  This  service  fee is  intended  to be in  consideration  of  personal
services and/or account maintenance services rendered by the dealer with respect
to Class B shares.  PFD will advance to dealers the first-year  service fee at a
rate equal to 0.25% of the amount invested.  As compensation  therefor,  PFD may
retain the  service  fee paid by the Fund with  respect  to such  shares for the
first year after purchase.  Dealers will become eligible for additional  service
fees with respect to such shares  commencing in the thirteenth  month  following
purchase.  Dealers  may from  time to time be  required  to meet  certain  other
criteria in order to receive service fees. PFD or its affiliates are entitled to
retain all  service  fees  payable  under the Class B Plan for which there is no
dealer  of  record or for  which  qualification  standards  have not been met as
partial  consideration for personal services and/or account maintenance services
performed by PFD or its affiliates for shareholder accounts.

         The purpose of  distribution  payments to PFD under the Class B Plan is
to  compensate  PFD  for  its  distribution  services  to  the  Fund.  PFD  pays
commissions to dealers as well as expenses of printing  prospectuses and reports
used for sales  purposes,  expenses with respect to the preparation and printing
of sales literature and other distribution related expenses,  including, without
limitation,  the cost  necessary to provide  distribution-related  services,  or
personnel,  travel office expenses and equipment. The Class B Plan also provides
that  PFD  will  receive  all  contingent   deferred  sales  charges   ("CDSCs")
attributable to Class B shares. See "Distribution Plans" in the Prospectus. When
a broker-dealer sells Class B shares and elects,  with PFD's approval,  to waive
its right to receive the  commission  normally paid at the time of the sale, PFD
may cause all or a portion of the  distribution  fees described above to be paid
to the broker-dealer.     



Class C Plan

   
         The Class C Plan  provides  that the Fund will pay PFD,  as the  Fund's
distributor  for its Class C shares,  a distribution  fee accrued daily and paid
quarterly,  equal on an annual  basis to 0.75% of the Fund's  average  daily net
assets  attributable  to Class C shares and will pay PFD a service  fee equal to
0.25% of the Fund's average daily net assets attributable to Class C shares. PFD
will in turn pay to securities dealers which enter into a sellingagreement  with
PFD a  distribution  fee and a service  fee at rates of up to 0.75%  and  0.25%,
respectively,  of the Fund's  average daily net assets  attributable  to Class C
shares  owned by  investors  for whom that  securities  dealer is the  holder or
dealer of record. The service fee is intended to be in consideration of personal
services and/or account maintenance services rendered by the dealer with respect
to Class C shares.  PFD will advance to dealers the first-year  service fee at a
rate equal to 0.25% of the amount invested.  As compensation  therefor,  PFD may
retain the  service  fee paid by the Fund with  respect  to such  shares for the
first year after  purchase.  Commencing  in the  thirteenth  month  following  a
purchase of Class C shares,  dealers will become eligible for additional service
fees at a rate of up to 0.25%  and  additional  compensation  at a rate of up to
0.75% of the net asset  value of such  shares.  Dealers may from time to time be
required to meet certain other criteria in order to receive service fees. PFD or
its affiliates are entitled to retain all service fees payable under the Class C
Plan for which there is no dealer of record or for which qualification standards
have not been met as partial  consideration for personal services and/or account
maintenance  services  performed  by  PFD  or  its  affiliates  for  shareholder
accounts.

         The purpose of  distribution  payments to PFD under the Class C Plan is
to  compensate  PFD for its  distribution  services  with respect to the Class C
shares of the Fund.  PFD pays  commissions  to  dealers as well as  expenses  of
printing prospectuses and reports used for sales purposes, expenses with respect
to   the   preparation   and   printing   of   sales    literature   and   other
distribution-related expenses, including, without limitation, the cost necessary
to provide  distribution-related  services, or personnel, travel office expenses
and  equipment.  The Class C Plan also  provides that PFD will receive all CDSCs
attributable to Class C shares.  (See  "Distribution  Plans" in the Prospectus.)
When a broker-dealer  sells Class C shares and elects,  with PFD's approval,  to
waive its right to receive the commission normally paid at the time of the sale,
PFD may cause all or a portion of the  distribution  fees described  above to be
paid to the broker-dealer.     



General

         In accordance with the terms of the Plans, PFD provides to the Fund for
review by the Trustees a quarterly  written report of the amounts expended under
the respective  Plan and the purpose for which such  expenditures  were made. In
the Trustees'  quarterly  review of the Plans,  they will consider the continued
appropriateness  and the  level  of  reimbursement  or  compensation  the  Plans
provide.

         No  interested  person of the Fund,  nor any Trustee of the Fund who is
not an  interested  person of the Fund,  has any  direct or  indirect  financial
interest in the operation of the Plans except to the extent that PFD and certain
of its employees may be deemed to have such an interest as a result of receiving
a portion of the amounts  expended under the Plans by the Fund and except to the
extent certain officers may have an interest in PFD's ultimate parent, PGI.

         The Plans were  adopted by a  majority  vote of the Board of  Trustees,
including  all of the Trustees who are not, and were not at the time they voted,
interested  persons,  as  defined  in the 1940 Act (none of whom had or have any
direct or indirect financial interest in the operation of the Plan) of the Fund,
cast in person at a meeting  called for the  purpose of voting on the Plans.  In
approving  the  Plans,  the  Trustees  identified  and  considered  a number  of
potential  benefits which the Plans may provide.  The Board of Trustees believes
that there is a reasonable  likelihood  that the Plans will benefit the Fund and
its current and future  shareholders.  Under their  terms,  the Plans  remain in
effect from year to year provided such continuance is approved  annually by vote
of the Trustees in the manner  described  above. The Plans may not be amended to
increase materially the annual percentage limitation of average net assets which
may be  spent  for  the  services  described  therein  without  approval  of the
shareholders of the Fund affected thereby,  and material amendments to the Plans
must also be approved by the Trustees in the manner  described above. A Plan may
be  terminated  at any time,  without  payment  of any  penalty,  by vote of the
majority of the Trustees who are not interested  persons of the Fund and have no
direct or indirect  financial  interest in the  operations  of the Plan, or by a
vote of a majority of the outstanding  voting securities of the respective Class
of the Fund (as defined in the 1940 Act). A Plan will automatically terminate in
the event of its  assignment  (as  defined  in the 1940 Act).  In the  Trustees'
quarterly   review  of  the  Plans,   they  will  consider  a  Plan's  continued
appropriateness and the level of compensation it provides.

   
         During the fiscal year ended December 31, 1996, the Fund incurred total
distribution  fees pursuant to the Fund'Upon  redemption,  Class A shares may be
subject to a 1% CDSC,  Class B shares are subject to a CDSC at a rate  declining
from a maximum of 4% of the lower of the cost or market  value of the shares and
Class C shares are subject to a 1% CDSC.  During the fiscal year ended  December
31, 1996, CDSCs, in the amount of approximately $7,834 were paid to PFD.
    



6.       SHAREHOLDER SERVICING/TRANSFER AGENT

         The  Fund  has   contracted   with  PSC,  60  State   Street,   Boston,
Massachusetts,  to act as shareholder servicing agent and transfer agent for the
Fund. This contract terminates if assigned and may be terminated without penalty
by  either  party  by  vote  of its  Board  of  Trustees  or a  majority  of its
outstanding voting securities and the giving of ninety days' written notice.

         Under  the  terms of its  contract  with  the  Fund,  PSC will  service
shareholder  accounts,  and its  duties  will  include:  (i)  processing  sales,
redemptions and exchanges of shares of the Fund; (ii) distributing dividends and
capital gains  associated with Fund portfolio  accounts;  and (iii)  maintaining
account records and responding to routine shareholder inquiries.

   
         PSC  receives  an annual fee of $30.00 per Class A, Class B and Class C
shareholder  account from the Fund as  compensation  for the services  described
above.  PSC is also reimbursed by the Fund for its  out-of-pocket  expenditures.
This fee is set at an amount  determined  by vote of a majority of the  Trustees
(including a majority of the  Trustees who are not parties to the contract  with
PSC or interested persons of any such parties) to be comparable to fees for such
services  being  paid by other  investment  companies.  The Fund may  compensate
entities which have agreed to provide certain sub-accounting  services,  such as
specific transaction processing and recordkeeping services. Any such payments by
the Fund would be in lieu of the per account fee which would  otherwise  be paid
by the Fund to PSC.     



7.       CUSTODIAN

   
         Brown  Brothers  Harriman & Co.,  (the  "Custodian"),  40 Water Street,
Boston,  Massachusetts  02109,  is the  custodian  of  the  Fund's  assets.  The
Custodian's responsibilities include safekeeping and controlling the Fund's cash
and securities,  handling the receipt and delivery of securities, and collecting
interest and dividends on the Fund's  investments.  The Custodian  also provides
fund accounting, bookkeeping and pricing assistance to the Fund.
    

         The Custodian does not determine the investment policies of the Fund or
decide which  securities it will buy or sell.  The Fund may invest in securities
issued  by the  Custodian,  deposit  cash in the  Custodian  and  deal  with the
Custodian as a principal in securities transactions. Portfolio securities may be
deposited into the Federal Reserve-Treasury  Department Book Entry System or the
Depository Trust Company.

8.       PRINCIPAL UNDERWRITER

         PFD, 60 State Street,  Boston,  Massachusetts,  serves as the principal
underwriter for the Fund in connection with the continuous offering of the Class
A, Class B and Class C shares of the Fund.


   
         During the Fund's fiscal years ending  December 31, 1994, 1995 and 1996
net underwriting  commissions retained by PFD in connection with the offering of
Fund  shares were  $135,694  $99,407,  and  $77,023,  respectively.  Commissions
reallowed  to dealers by PFD in those  periods  were  approximately  $1,009,658,
$754,315, and $531,201, respectively.




         The Fund will not generally issue Fund shares for  consideration  other
than cash. At the Fund's sole discretion,  however, it may issue Fund shares for
consideration  other than cash in connection  with a  reorganization,  statutory
merger, or other acquisition of portfolio securities.     

9.       INDEPENDENT PUBLIC ACCOUNTANT

   
         Effective  January 1, 1994,  Arthur  Andersen LLP 225 Franklin  Street,
Boston,  Massachusetts  02110, was selected as the independent public accountant
for the Fund,  providing audit services,  tax return review,  and assistance and
consultation   with  respect  to  the  preparation  of  filings  with  the  SEC.
Previously, Coopers & Lybrand had served as independent public accountant to the
Fund. Arthur Andersen's  election as independent public accountant was approved,
at a meeting called for the purpose of voting on such approval, by the vote of a
majority  of those  Trustees  on the Board of  Trustees  who are not  interested
persons of the Fund.     

10.      PORTFOLIO TRANSACTIONS

         All orders for the purchase or sale of portfolio  securities are placed
on behalf of the Fund by PMC  pursuant  to  authority  contained  in the  Fund's
Management  Contract.  In selecting  broker-dealers,  PMC will consider  various
relevant  factors,  including,  but not  limited  to,  the  size and type of the
transaction;  the nature and  character  of the markets  for the  security to be
purchased  or  sold;  the  execution  efficiency,   settlement  capability,  and
financial condition of the broker-dealer; the broker-dealer's execution services
rendered on a continuing  basis;  and the  reasonableness  of any  broker-dealer
spreads.

         PMC may select  broker-dealers  which provide brokerage and/or research
services to the Fund and/or  other  investment  companies  managed by PMC or who
sell shares of the Pioneer mutual funds. In addition,  if PMC determines in good
faith that the amount of commissions charged by a broker-dealer is reasonable in
relation to the value of the  brokerage and research  services  provided by such
broker-dealer,  the Fund may pay commissions to such  broker-dealer in an amount
greater  than the amount  another  firm may charge.  Such  services  may include
advice  concerning the value of securities;  the  advisability  of investing in,
purchasing  or  selling  securities;  the  availability  of  securities  or  the
purchasers or sellers of securities;  furnishing analyses and reports concerning
issuers, industries, securities, economic factors and trends, portfolio strategy
and  performance  of  accounts;   and  effecting  securities   transactions  and
performing functions incidental thereto (such as clearance and settlement).  PMC
maintains a listing of  broker-dealers  who provide  such  services on a regular
basis.  However,  because it is anticipated that many  transactions on behalf of
the  Fund  and  other  investment  companies  managed  by PMC  are  placed  with
broker-dealers  (including  broker-dealers on the listing) without regard to the
furnishing of such  services,  it is not possible to estimate the  proportion of
such transactions  directed to such broker-dealers  solely because such services
were provided.

         The  research  received  from  broker-dealers  may be  useful to PMC in
rendering investment management services to the Fund as well as other investment
companies  managed by PMC,  although not all such  research may be useful to the
Fund. Conversely,  such information provided by broker-dealers who have executed
transaction  orders on behalf of such other PMC  clients may be useful to PMC in
carrying out its  obligations  to the Fund. The receipt of such research has not
reduced PMC's normal independent research activities; however, it enables PMC to
avoid the additional  expenses  which might  otherwise be incurred if it were to
attempt to develop comparable information through its own staff.

         The Board of Trustees  periodically  reviews PMC's  performance  of its
responsibilities  in connection with the placement of portfolio  transactions on
behalf of the Fund.

         In  circumstances  where two or more  broker-dealers  offer  comparable
prices and executions, preference may be given to a broker-dealer which has sold
shares of the Fund as well as shares of other  investment  companies or accounts
managed by PMC. This policy does not imply a commitment to execute all portfolio
transactions through all broker-dealers that sell shares of the Fund.

         In addition to the Fund,  PMC acts as investment  adviser or subadviser
to the other Pioneer mutual funds,  Pioneer Interest  Sharesand  certain private
accounts  with  investment  objectives  similar to that of the Fund.  Securities
frequently meet the investment  objective of the Fund, such other funds and such
private  accounts.  In such cases,  the  decision to recommend a purchase to one
fund or  account  rather  than  another  is based on a number  of  factors.  The
determining  factors in most cases are the  amount of  securities  of the issuer
then  outstanding,  the value of those securities and the market for them. Other
factors considered in the investment  recommendations  include other investments
which each mutual fund or account presently has in a particular industry and the
availability of investment funds in each mutual fund or account.

         It is possible that at times identical  securities will be held by more
than one mutual fund and/or  account.  However,  positions in the same issue may
vary and the length of time that any mutual  fund or account  may choose to hold
its investment in the same issue may likewise vary. To the extent that the Fund,
another Pioneer mutual fund, Pioneer Interest Sharesor a private account managed
by PMC may not be able to  acquire as large a position  in such  security  as it
desires, it may have to pay a higher price for the security. Similarly, the Fund
may not be able to obtain as large an execution of an order to sell or as high a
price for any particular  portfolio security if PMC decides to sell on behalf of
another account the same portfolio security at the same time. On the other hand,
if the same  securities  are  bought  or sold at the same  time by more than one
mutual fund or account, the resulting participation in volume transactions could
produce better  executions  for the Fund or the account.  In the event more than
one account  purchases or sells the same security on a given date, the purchases
and sales will normally be made as nearly as  practicable on a pro rata basis in
proportion to the amounts desired to be purchased or sold by each.

   
         The Fund paid no  brokerage  commissions  for the  fiscal  years  ended
December 31, 1994, 1995 and 1996.


11.         TAX STATUS

It is the Fund's policy to meet the requirements of Subchapter M of the Internal
Revenue Code of 1986, as amended (the "Code"),  for qualification as a regulated
investment  company.  These  requirements  relate to the  sources  of the Fund's
income, the  diversification of its assets and the distribution of its income to
shareholders.  If the Fund meets all such  requirements  and  distributes to its
shareholders, in accordance with the Code's timing requirements,  all investment
company  taxable income and net capital gain, if any,  which it earns,  the Fund
will be relieved of the necessity of paying federal income tax.

In order to qualify as a regulated  investment  company under  Subchapter M, the
Fund must,  among other  things,  derive at least 90% of its annual gross income
from interest, payments with respect to securities loans, gains from the sale or
other  disposition of securities or other income  (including  gains from options
and futures contracts) derived with respect to its business of investing in such
securities (the "90% income test"),  limit its gains from the sale of securities
and certain other  positions held for less than three months to less than 30% of
its annual gross income (the "30% test") and satisfy certain annual distribution
and quarterly diversification requirements.

In accordance with its investment  objectives,  the Fund invests its assets in a
manner  which  will  provide  as large a  portion  of  tax-exempt  income  as is
consistent with the protection of shareholders' capital. Since the protection of
capital is an important aspect of the Fund's investment objectives, the Fund may
from time to time invest a portion of its  portfolio in  short-term  obligations
and  may  engage  in  transactions  generating  gains  or  income  which  is not
tax-exempt,  e.g.,  purchase  non-municipal  securities,  sell or lend portfolio
securities,  enter into repurchase agreements,  dispose of rights to when-issued
securities prior to issuance,  acquire any debt obligation at a market discount,
acquire certain stripped  tax-exempt  obligations or their coupons or enter into
options and futures transactions.

The Code  permits  tax-exempt  interest  received by the Fund to flow through as
tax-exempt "exempt-interest dividends" to the Fund's shareholders, provided that
the Fund  qualifies  as a regulated  investment  company and at least 50% of the
value of the Fund's  total  assets at the close of each  quarter of its  taxable
year consists of tax-exempt obligations,  i.e., obligations described in Section
103(a) of the Code.  That part of the  Fund's  net  investment  income  which is
attributable to interest from tax-exempt obligations and which is distributed to
shareholders  will be  designated by the Fund as an  "exempt-interest  dividend"
under the Code.  Exempt-interest  dividends  are excluded  from a  shareholder's
gross income under the Code. The  percentage of income  designated as tax-exempt
is applied uniformly to all distributions  made during each taxable year and may
differ  from the  actual  tax-exempt  percentage  earned by the Fund  during any
particular  month.  That portion of the Fund's dividends and  distributions  not
designated as tax-exempt will be taxable as described below.

Dividends from investment  company taxable  income,  which includes  taxable net
investment  income and net  short-term  capital gain in excess of net  long-term
capital  loss,  are  taxable as  ordinary  income,  whether  received in cash or
reinvested in additional  shares.  Dividends from net long-term  capital gain in
excess of net  short-term  capital  loss,  if any,  whether  received in cash or
reinvested  in  additional  shares,  are taxable to the Fund's  shareholders  as
long-term  capital gains for federal  income tax purposes  without regard to the
length of time shares of the Fund have been held.  The federal income tax status
of all distributions will be reported to shareholders annually.

Any  dividend  declared  by the Fund in  October,  November  or December as of a
record  date in such a month  and paid  during  the  following  January  will be
treated for federal income tax purposes as received by  shareholders on December
31 of the calendar year in which it is declared.

If the Fund  invests in certain  pay-in-kind  securities  ("PIKs"),  zero coupon
securities,  deferred interest  securities or, in general,  any other securities
with  original  issue  discount  (or with market  discount if the Fund elects to
include  market  discount in income  currently),  the Fund must accrue income on
such  investments  for each taxable year,  which  generally will be prior to the
receipt of the corresponding cash payments.  However,  the Fund must distribute,
at least annually,  all or  substantially  all of its net taxable and tax-exempt
income, including such accrued income, to shareholders to qualify as a regulated
investment  company  under the Code and avoid  Federal  income and excise taxes.
Therefore,  the Fund may  have to  dispose  of its  portfolio  securities  under
disadvantageous  circumstances  to generate cash, or may have to leverage itself
by borrowing the cash, to satisfy distribution requirements.

For federal  income tax  purposes,  the Fund is permitted to carry forward a net
capital loss for any year to offset its capital gains,  if any, during the eight
years following the year of the loss. To the extent subsequent capital gains are
offset by such losses,  they would not result in federal income tax liability to
the  Fund  and  therefore  are  not  expected  to  be  distributed  as  such  to
shareholders.  As of the end of its most recent  taxable  year,  the Fund had no
capital loss carryforwards.

At the time of an investor's  purchase of Fund shares, a portion of the purchase
price may be attributable  to realized or unrealized  appreciation in the Fund's
portfolio.  Consequently,  subsequent  distributions  on these  shares from such
appreciation  may be taxable to such investor even if the net asset value of the
investor's  shares  is,  as a result  of the  distributions,  reduced  below the
investor's cost for such shares and the distributions  economically  represent a
return of a portion of the investment.

Redemptions and exchanges are taxable events. Any loss realized by a shareholder
on the redemption,  exchange,  or other disposition of shares with a tax holding
period  of  six  months  or  less  will  be  disallowed  to  the  extent  of any
exempt-interest  dividends paid with respect to such shares,  and any portion of
such loss that  exceeds  the amount  disallowed  will be treated as a  long-term
capital loss to the extent of any  distributions  treated as  long-term  capital
gain with respect to such shares.

In addition,  if Class A shares  redeemed or  exchanged  have been held for less
than 91 days, (1) in the case of a  reinvestment  at net asset value pursuant to
the reinvestment privilege, the sales charge paid on such shares is not included
in their tax basis under the Code, and (2) in the case of an exchange,  all or a
portion of the sales  charge  paid on such  shares is not  included in their tax
basis under the Code, to the extent a sales charge that would otherwise apply to
the shares  received is reduced  pursuant to the exchange  privilege.  In either
case,  the  portion  of the sales  charge not  included  in the tax basis of the
shares  redeemed or  surrendered  in an exchange is included in the tax basis of
the shares acquired in the  reinvestment  or exchange.  Losses on redemptions or
other  dispositions  of shares may be disallowed  under "wash sale" rules in the
event of other  investments  in the  Fund  (including  those  made  pursuant  to
reinvestment of dividends and/or capital gain distributions)  within a period of
61 days  beginning 30 days before and ending 30 days after a redemption or other
disposition of shares. In such a case, the disallowed  portion of any loss would
be  included  in the  federal  tax  basis of the  shares  acquired  in the other
investments.

Options written or purchased and futures  contracts  entered into by the Fund on
certain  securities  or indices may cause the Fund to recognize  gains or losses
from  marking-to-market  at the end of its taxable year even though such options
may not have lapsed, been closed out, or exercised or such futures contracts may
not have  been  performed  or closed  out.  The tax  rules  applicable  to these
contracts  may affect the  characterization  as long-term or  short-term of some
capital  gains and losses  realized  by the Fund.  Losses on certain  options or
futures contracts and/or  offsetting  positions  (portfolio  securities or other
positions  with  respect  to  which  the  Fund's  risk of loss is  substantially
diminished  by one or more  options or futures  contracts)  may also be deferred
under  the  tax  straddle  rules  of  the  Code,   which  may  also  affect  the
characterization  of capital gains or losses from straddle positions and certain
successor  positions as long-term or  short-term.  Certain tax  elections may be
available that would enable the Fund to ameliorate  some adverse  effects of the
tax rules  described in this  paragraph.  The tax rules  applicable  to options,
futures  contracts and straddles may affect the amount,  timing and character of
the Fund's income and losses and hence of its distributions to shareholders.

The   Fund's   dividends   and   distributions   will   not   qualify   for  any
dividends-received  deduction  that might  otherwise  be  available  for certain
dividends received by shareholders that are corporations.

A state  income (and  possibly  local income  and/or  intangible  property)  tax
exemption is generally available to the extent (if any) the Fund's distributions
are derived from interest on (or, in the case of intangible  property taxes, the
value of its assets is  attributable  to) certain U.S.  Government  obligations,
provided in some states that certain thresholds for holdings of such obligations
and/or reporting  requirements are satisfied.  The Fund will not seek to satisfy
any  threshold or reporting  requirements  that may apply in  particular  taxing
jurisdictions,  although the Fund may in its sole  discretion  provide  relevant
information to shareholders.

The exemption of exempt-interest  dividends for federal income tax purposes does
not  necessarily  result in  exemption  under the tax laws of any state or local
taxing authority,  which vary with respect to the taxation of such income.  Many
states will exempt from tax that portion of an  exempt-interest  dividend  which
represents interest received by the Fund on that state's securities,  subject in
some cases to compliance with concentration and/or reporting requirements, which
the Fund makes no commitment to seek to satisfy.  However,  the Fund will report
annually to its  shareholders  the percentage of interest income received by the
Fund during the preceding year on federally tax-exempt  obligations  indicating,
on a state-by-state  basis only, the source of such income.  Each shareholder is
advised to consult  his own tax  adviser  regarding  the  exemption,  if any, of
exempt-interest  dividends  under the state and  local  laws  applicable  to the
shareholder.

Interest on  indebtedness  incurred  (directly or indirectly) by shareholders to
purchase or carry shares of the Fund will not be deductible  for federal  income
tax  purposes  to  the  extent  it is  deemed  under  the  Code  and  applicable
regulations to relate to exempt-interest dividends received from the Fund.

Federal law requires  that the Fund  withhold (as "backup  withholding")  31% of
reportable payments, including taxable dividends, capital gain dividends and the
proceeds of redemptions  (including  exchanges) and  repurchases to shareholders
who have not complied with Internal  Revenue  Service  ("IRS")  regulations.  In
order to avoid this withholding requirement,  shareholders must certify on their
Account  Applications,  or on separate IRS Forms W-9,  that the Social  Security
Number or other  Taxpayer  Identification  Number they provide is their  correct
number and that they are not currently  subject to backup  withholding,  or that
they are exempt from backup  withholding.  The Fund may nevertheless be required
to  withhold  if it  receives  notice  from the IRS or a broker  that the number
provided  is  incorrect  or  backup  withholding  is  applicable  as a result of
previous  underreporting of interest or dividend income.  Backup withholding may
be  inapplicable  for any year in which the Fund  reasonably  estimates  that at
least 95% of its  dividends  paid with respect to such year are  exempt-interest
dividends.

If, as anticipated,  the Fund qualifies as a regulated  investment company under
the Code,  it will not be required to pay any  Massachusetts  income,  corporate
excise or franchise taxes or any Delaware corporation income tax.

The  description of certain  federal tax  provisions  above relates only to U.S.
federal income tax consequences for shareholders who are U.S. persons, i.e. U.S.
citizens or residents or U.S. corporations, partnerships, trusts or estates, and
who are subject to U.S.  federal income tax. This  description  does not address
the special tax rules that may be applicable  to particular  types of investors,
such as financial  institutions,  insurance  companies,  securities  dealers, or
tax-exempt or  tax-deferred  plans,  accounts or entities.  Investors other than
U.S.  persons  may be subject to  different  U.S.  tax  treatment,  including  a
possible 30%  non-resident  alien U.S.  withholding tax (or  non-resident  alien
withholding tax at a lower treaty rate) on amounts treated as ordinary dividends
from the Fund and, unless an effective IRS Form W-8 or authorized substitute for
Form W-8 is on file, to 31% backup  withholding  on certain other  payments from
the Fund.  Shareholders  should  consult their own tax advisers on these matters
and on state, local and other applicable tax laws.


12.      DESCRIPTION OF SHARES
    

General

         The Fund is an open-end  investment  company  established as a Nebraska
corporation in 1968 and  reorganized as a Delaware  business trust in June 1994.
Prior to December 1, 1993 the Fund was called  Mutual of Omaha  Tax-Free  Income
Fund,  Inc. and prior to June 30, 1994 was called Pioneer  Tax-Free Income Fund,
Inc.  Reference to the Fund  includes both the Delaware  business  trust and the
Nebraska corporation. The Board of Trustees, as of the date of this Statement of
Additional Information,  has authorized the issuance of three classes of shares,
Class A, Class B and Class C.

         Unless otherwise  required by the 1940 Act or the Declaration of Trust,
the  Fund  has  no  intention  of  holding  annual  meetings  of   shareholders.
Shareholders may remove a Trustee by the affirmative vote of at least two-thirds
of the Fund's  outstanding shares and the Trustees shall promptly call a meeting
for such purpose when requested to do so in writing by the record holders of not
less than 10% of the  outstanding  shares of the Fund.  Shareholders  may, under
certain  circumstances  communicate  with other  shareholders in connection with
requesting a special  meeting of  shareholders.  However,  at any time that less
than a majority of the Trustees holding office were elected by the shareholders,
the  Trustees  will call a special  meeting of  shareholders  for the purpose of
electing Trustees.

         The  Declaration  of Trust  permits the issuance of series of shares in
addition to the Fund which would represent  interests in separate  portfolios of
investments.  No series  would be  entitled  to share in the assets of any other
series or be liable for the expenses or liabilities of any other series.

         In addition to the requirements  under Delaware law, the Declaration of
Trust provides that  shareholders  of the Fund may bring a derivative  action on
behalf of the Fund only if the following  conditions  are met: (a)  shareholders
eligible to bring such  derivative  action under  Delaware law who hold at least
10% of the outstanding  shares of the Fund, or 10% of the outstanding  shares of
the series or class to which such action relates,  shall join in the request for
the Trustees to commence  such action;  and (b) the Trustees  must be afforded a
reasonable  amount  of  time  to  consider  such  shareholder   request  and  to
investigate  the basis of such claim.  The Trustees  shall be entitled to retain
counsel or other  advisers  in  considering  the merits of the request and shall
require an undertaking by the shareholders  making such request to reimburse the
Fund for the  expense  of any  such  advisers  in the  event  that the  Trustees
determine not to bring such action.

Shareholder and Trustee Liability

         The Fund is organized as a Delaware business trust, and, under Delaware
law, the shareholders of such a trust are not generally subject to liability for
the debts or obligations of the trust. Similarly, Delaware law provides that the
Fund will not be liable for the debts or  obligations of any other series of the
trust.  However, no similar statutory or other authority limiting business trust
shareholder  liability exists in many other states.  As a result,  to the extent
that a Delaware  business trust or a shareholder is subject to the  jurisdiction
of courts in such other  states,  the courts may not apply  Delaware law and may
thereby subject the Delaware business trust shareholders to liability.  To guard
against this risk, the  Declaration  of Trust contains an express  disclaimer of
shareholder  liability  for acts or  obligations  of the  Fund.  Notice  of such
disclaimer  will normally be given in each  agreement,  obligation or instrument
entered  into or executed  by the Fund or a Trustee.  The  Declaration  of Trust
provides for  indemnification by the Fund for any loss suffered by a shareholder
as a result of an obligation of the Fund. The Declaration of Trust also provides
that the Fund shall, upon request,  assume the defense of any claim made against
any  shareholder  for any act or obligation of the Fund and satisfy any judgment
thereon.  The Trustees  believe that, in view of the above, the risk of personal
liability of shareholders is remote.

         The Declaration of Trust further provides that the Trustees will not be
liable for errors of judgment  or  mistakes  of fact or law,  but nothing in the
Declaration of Trust protects a Trustee against any liability to which he or she
would otherwise be subject by reason of willful  misfeasance,  bad faith,  gross
negligence,  or reckless  disregard of the duties involved in the conduct of his
or her office.

13.      DETERMINATION OF NET ASSET VALUE

   
         The net asset  value per share of each class of the Fund is  determined
as of the  close  of  regular  trading  on the  New  York  Stock  Exchange  (the
"Exchange")  (normally 4:00 p.m., Eastern Time) on each day the Exchange is open
for business.  As of the date of this Statement of Additional  Information,  the
Exchange is open for business every weekday  except for the following  holidays:
New Year's Day,  Presidents' Day, Good Friday,  Memorial Day,  Independence Day,
Labor Day,  Thanksgiving Day and Christmas Day. The net asset value per share of
each class of the Fund is also determined on any other day in which the level of
trading in its portfolio  securities is  sufficiently  high that the current net
asset  value per share might be  materially  affected by changes in the value of
its portfolio securities.  On any day in which no purchase orders for the shares
of the Fund become  effective  and no shares are  tendered for  redemption,  the
Fund's net asset value per share may not be determined.     

         The net asset  value per share of each class of the Fund is computed by
taking the value of all of the Fund's assets  attributable to a class,  less its
liabilities  attributable  to that  class,  and  dividing  it by the  number  of
outstanding  shares of the class.  For purposes of determining  net asset value,
expenses of the Fund are accrued daily and taken into account.

         In  determining  the value of the assets of the Fund for the purpose of
obtaining the net asset value,  securities  for which  reliable  quotations  are
readily  available  shall be  valued  on the basis of  valuations  furnished  by
pricing  services  which  utilize  electronic  data  processing   techniques  to
determine the  valuations  for normal  institutional-size  trading units of such
securities.  Securities  not valued by the pricing  service  for which  reliable
quotations are readily available,  shall be valued at market values furnished by
recognized  dealers in such  securities.  Short-term  obligations with remaining
maturities of 60 days or less shall be valued at amortized cost.  Securities and
other assets for which reliable  quotations are not readily available,  shall be
valued at their  fair  value as  determined  in good  faith  under  consistently
applied guidelines established by and under the general supervision of the Board
of Trustees of the Fund, although the actual calculations may be made by persons
acting pursuant to the direction of the Board.

14.      SYSTEMATIC WITHDRAWAL PLAN

   
         The  Systematic  Withdrawal  Plan  ("SWP")  is  designed  to  provide a
convenient  method of receiving fixed payments at regular  intervals from shares
of the Fund  deposited  by the  applicant  under this SWP.  The  applicant  must
deposit or purchase for deposit with PSC shares of the Fund having a total value
of not less than  $10,000.  Periodic  checks  of $50 or more  will be  deposited
monthly or quarterly  directly into a bank account  designated by the applicant,
or will be sent by check to the  applicant,  or to any person  designated by the
applicant.  A  designation  of a third  party  to  receive  checks  requires  an
acceptable signature  guarantee..  SWPs for Class B and C share accounts will be
limited to 10% of the value of the account at the time the SWP is implemented as
described in the  Prospectus.  See "Waiver or Reduction of  Contingent  Deferred
Sales Charge" in the Prospectus.     


         Any income dividends or capital gains distributions on shares under the
SWP  will be  credited  to the  SWP  account  on the  payment  date in full  and
fractional shares at the net asset value per share in effect on the record date.

         SWP  payments are made from the  proceeds of the  redemption  of shares
deposited under the SWP in a SWP account.  Redemptions are taxable  transactions
to shareholders.  To the extent that such  redemptions for periodic  withdrawals
exceed  dividend income  reinvested in the SWP account,  such  redemptions  will
reduce and may  ultimately  exhaust  the number of shares  deposited  in the SWP
account. In addition, the amounts received by a shareholder cannot be considered
as an  actual  yield or  income on his or her  investment  because  part of such
payments may be a return of his or her investment.

         The SWP may be terminated  at any time (1) by written  notice to PSC or
from PSC to the shareholder;  (2) upon receipt by PSC of appropriate evidence of
the  shareholder's  death;  or (3)  when all  shares  under  the SWP  have  been
redeemed.

   
15.      LETTER OF INTENT (Class A only)

A Letter of Intent  ("LOI") may be  established by completing the LOI section of
the Account  Application.  When you sign the Account  Application,  you agree to
irrevocably appoint PSC your attorney-in-fact to surrender for redemption any or
all  shares  held in escrow  with full  power of  substitution.  An LOI is not a
binding obligation upon the investor to purchase,  or the Fund to sell, the full
amount indicated.

If the total purchases, less redemptions,  exceed the amount specified under the
LOI and are in an amount which would  qualify for a further  quantity  discount,
all transactions  will be recomputed on the expiration date of the LOI to effect
the lower sales charge.  Any difference in the sales charge  resulting from such
recomputation  will be either delivered to you in cash or invested in additional
shares  at  the  lower  sales  charge.   The  dealer,  by  signing  the  Account
Application,  agrees to return to PFD, as part of such  retroactive  adjustment,
the excess of the  commission  previously  reallowed  or paid to the dealer over
that which is applicable to the actual amount of the total  purchases  under the
LOI.

If the total  purchases,  less  redemptions,  are less than the amount specified
under the LOI, you must remit to PFD any difference  between the sales charge on
the amount  actually  purchased and the amount  originally  specified in the LOI
section of the Account Application. When the difference is paid, the shares held
in escrow will be deposited to your account. If you do not pay the difference in
sales charge within 20 days after written request from PFD or your dealer,  PSC,
after receiving  instructions  from PFD, will redeem the  appropriate  number of
shares held in escrow to realize the difference and release any excess. See "How
to  Purchase  Fund  Shares  -  Letter  of  Intent"  in the  Prospectus  for more
information.     


16.  INVESTMENT RESULTS

         Other Quotations, Comparisons, and General Information

         From  time to  time,  in  advertisements,  in sales  literature,  or in
reports to  shareholders,  the past  performance  of the Fund may be illustrated
and/or  compared  with  that of  other  mutual  funds  with  similar  investment
objectives, and to other relevant indices. For example, the Fund may compare its
yield and total return to the Shearson  Lehman Hutton  Municipal Bond Index,  or
other comparable indices or investment vehicles. In addition, the performance of
the Fund may be compared to alternative  investment or savings vehicles (such as
individual securities, bank deposits, or certificates of deposit) and/or indices
or indicators of economic  activity,  e.g.,  inflation,  interest  rates, or the
Consumer Price Index,  performance  rankings and listings reported in newspapers
or national  business and  financial  publications,  such as Barron's,  Business
Week,  Consumers Digest,  Consumer Reports,  Financial World,  Forbes,  Fortune,
Investors Business Daily, Kiplinger's Personal Finance Magazine, Money Magazine,
New York Times,  Personal Investor,  Smart Money, USA Today, U.S. News and World
Report,  the Wall  Street  Journal,  and Worth may also be cited (if the Fund is
listed in any such  publication) or used for comparison,  as well as performance
listings and rankings  from various other  sources  including CDA  Weisenberger,
Donoghue's  Mutual  Fund  Almanac,   Investment  Company  Data,  Inc.,  Ibbotson
Associates,  Johnson's Charts, Kanon Bloch Carre and Company,  Lipper Analytical
Services,  Inc.,  Micropal,  Inc.,  Morningstar,   Inc.,  Schabacker  Investment
Management and Towers Data Systems, Inc.

         In addition,  from time to time quotations from articles from financial
publications  such as those listed above may be used in  advertisements in sales
literature,  or in  reports  to  shareholders  of the  Fund.  The  Fund may also
present,  from time to time,  historical  information  depicting  the value of a
hypothetical  account  in one or more  classes  of the  Fund  since  the  Fund's
inception.

         In presenting  investment results, the Fund may also include references
to certain  financial  planning  concepts,  including (a) an investor's  need to
evaluate his financial  assets and  obligations to determine how much to invest;
(b) his need to analyze the objectives of various investments to determine where
to invest;  and (c) his need to analyze his time frame for future  capital needs
to determine how long to invest. The investor controls these three factors,  all
of which affect the use of investments in building assets.

         One of the  methods  used to measure the Fund's  performance  is "total
return." "Total return" will normally  represent the percentage  change in value
of an account,  or of a hypothetical  investment in the Fund, over any period up
to the lifetime of the Fund. Total return  calculations  will usually assume the
reinvestment  of all  dividends  and  capital  gains  distributions  and will be
expressed as a percentage  increase or decrease from an initial  value,  for the
entire period or for one or more  specified  periods  within the entire  period.
Total  return  percentages  for  periods  of less than one year will  usually be
annualized;  total  return  percentages  for  periods  longer than one year will
usually be  accompanied  by total  return  percentages  for each year within the
period and/or by the average annual compounded total return for the period.  The
income and capital  components  of a given return may be separated and portrayed
in a  variety  of ways in  order  to  illustrate  their  relative  significance.
Performance may also be portrayed in terms of cash or investment values, without
percentages. Past performance cannot guarantee any particular future result.

         Other data that may be advertised  or published  about the Fund include
the average portfolio quality,  the average portfolio maturity,  and the average
portfolio duration.

         In determining the average annual total return  (calculated as provided
above), recurring fees, if any, that are charged to all shareholder accounts are
taken into  consideration.  For any account  fees that vary with the size of the
account,  the account fee used for purposes of the above  computation is assumed
to be the fee that would be charged to the Fund's mean account size.

         The Fund's yield quotations and average annual total return  quotations
as they may appear in the Prospectus,  this Statement of Additional  Information
or in advertising are calculated by standard methods prescribed by the SEC.

         Standardized Yield Quotations

         Yield  quotations  for Class A, Class B and Class C shares are computed
by dividing the net investment income per share attributable to a class during a
base period of 30 days, or one month, by the maximum offering price per share of
that class of the Fund on the last day of such base  period in  accordance  with
the following formula:

                                          a-b
                  YIELD =  2[( ----- +1)6-1]
                                           cd

Where:            a        =        interest earned during the period

                  b        =        net expenses accrued for the period

                  c        =        the average daily number of shares
                                    outstanding during the period that
                                    were entitled to receive dividends

                  d        =        the maximum offering price per share
                                    on the last day of the period

For purposes of calculating  interest earned on debt  obligations as provided in
item "a" above:

         (i) The  yield  to  maturity  of each  obligation  held by the  Fund is
computed based on the market value of the obligation  (including  actual accrued
interest,  if any) at the close of  business  each day during  the  30-day  base
period, or, with respect to obligations purchased during the month, the purchase
price (plus  actual  accrued  interest,  if any) on  settlement  date,  and with
respect to obligations sold during the month the sale price (plus actual accrued
interest, if any) between the trade and settlement dates;

         (ii) The yield to maturity of each  obligation  is then  divided by 360
and the resulting  quotient is multiplied by the market value of the  obligation
(including actual accrued interest,  if any) to determine the interest income on
the obligation for each day. The yield to maturity  calculation has been made on
each obligation during the 30 day base period;

         (iii)    Interest earned on all debt obligations during the 30-day
                  or one month period is then totaled;

         (iv) The maturity of an obligation with a call provision(s) is the next
call date on which the obligation reasonably may be expected to be called or, if
none, the maturity date;

         (v)  Obligations  with sinking fund call  provisions may be regarded as
maturing  as to that  portion to be retired  on each  sinking  fund call date or
during a twelve-month period; and

         (vi) In the case of a tax exempt  obligation  issued  without  original
issue discount and having a current market discount, the coupon rate of interest
of the  obligation  is used in lieu of yield to maturity to  determine  interest
income earned on the  obligation.  In the case of a tax exempt  obligation  with
original  issue discount where the discount based on the current market value of
the  obligation  exceeds the then  remaining  portion of original issue discount
(i.e. market discount),  the yield to maturity used to determine interest income
earned  on the  obligation  is the  imputed  rate  based on the  original  issue
discount calculation. In the case of a tax exempt obligation with original issue
discount  where the discount based on the current market value of the obligation
is less than the then remaining  portion of the original issue discount  (market
premium),  the yield to maturity used to determine interest income earned on the
obligation is based on the market value of the obligation.

   
         The  Fund's  30-day  SEC yield for Class A shares,  Class B shares  and
Class C shares on December 31, 1996,  determined in accordance  with the formula
above, was 4.45%, 3.88% and 3.89%, respectively.     

         Taxable Equivalent Yield

   
         The Fund may also from time to time  advertise  its taxable  equivalent
yield  which  is  determined  by  dividing  that  portion  of the  Fund's  yield
(calculated  as  described  above)  that is tax  exempt by one minus the  stated
federal  income tax rate and adding the product to that portion,  if any, of the
Fund's yield that is not tax exempt. The Fund's  tax-equivalent yield assuming a
39.6% tax rate for the period ended December 31, 1996 was 7.37%,  6.42%and 6.44%
for Class A  shares,  Class B shares,  and Class C shares,  respectively.  For a
description of how to compare yields on municipal bonds and taxable  securities,
see the Taxable  Equivalent  Formula set forth in Appendix A to the  Prospectus.
Standardized Average Annual Total Return Quotations     

         Average  annual  total  return  quotations  are computed by finding the
average  annual  compounded  rates of return  that  would  cause a  hypothetical
investment  made on the first  day of a  designated  period to equal the  ending
redeemable  value  of  such  hypothetical  investment  on  the  last  day of the
designated period in accordance with the following formula:

                            P(1+T)n  =  ERV

Where:  P         =        a hypothetical initial payment of $1000, less the
                           maximum sales load for Class A shares or the
                           deduction of the CDSC on Class B or Class C shares
                           at the end of the period.

         T        =        average annual total return

         n        =        number of years

         ERV      =        ending redeemable value of the hypothetical $1000
                           initial payment made at the beginning of the
                           designated period (or fractional portion thereof)

   
         For purposes of the above computation, it is assumed that all dividends
and distributions  made by the Fund are reinvested at net asset value during the
designated  period.  The average annual total return  quotation is determined to
the nearest 1/100 of 1%.

         In determining the average annual total return  (calculated as provided
above),  recurring fees, if any, that are charged to all shareholder accounts of
a particular Class are taken into consideration.  For any account fees that vary
with the size of the  account,  the account  fee used for  purposes of the above
computation  is assumed  to be the fee that would be charged to the Class'  mean
account size.

         The average  annual total returns for period  ending  December 31, 1996
were:

                     1 Year          5 Years    10 Years         Life-of-Fund
                     ------          -------    --------         ------------

Class A Shares*     (1.07)%          5.86        6.93             6.52%
Class B Shares**    (1.20)%          N/A         N/A              4.00%
Class C Shares***    N/A             N/A         N/A              1.23%

*        Commencement of operations, January 18, 1977.
**       Class B shares were first offered on April 28, 1995.
***      Class C shares were first offered on January 31, 1996

         Class A share results reflect the maximum sales charge of 4.50%.  Class
B share results reflect the deduction of the maximum  applicable CDSC at the end
of the period;  the maximum  CDSC of 4% declines  over six years.  Class C share
results reflect a deduction of the 1% CDSC at the end of the period.
    


Automated Information Line

         FactFoneSM,   Pioneer's  24-hour  automated  information  line,  allows
shareholders   to  dial   toll-free   1-800-225-4321   and  hear  recorded  fund
information, including:

         o                 net asset value prices for all Pioneer mutual funds;

         o                 annualized 30-day yields on Pioneer's bond funds;

         o                 annualized 7-day yields and 7-day effective
                           (compound) yields for Pioneer's money market
                           funds; and

         o                 dividends and capital gains distributions on all
                           Pioneer mutual funds.

         Yields  are  calculated  in  accordance  with  SEC  mandated   standard
formulas.

         In  addition,  by  using  a  personal  identification  number  ("PIN"),
shareholders  may access their account balance and last three  transactions  and
may order a duplicate  statement.  See  "FactFoneSM"  in the Prospectus for more
information.

   
         All performance numbers  communicated through FactFoneSM represent past
performance;  figures for all bond funds  include the maximum  applicable  sales
charge.  A  shareholder's  actual yield and total return will vary with changing
market conditions.  The value of Class A, Class B and Class C shares (except for
Pioneer's  money market fund,  which seeks a stable $1.00 share price) will also
vary,  and  such  shares  may be worth  more or less at  redemption  than  their
original cost.     

17.  GENERAL INFORMATION

         The  Fund  is  registered  with  the  SEC  as  a  diversified  open-end
management investment company. Such registration does not involve supervision by
the SEC of the management or policies of the Fund. For further  information with
respect to the Fund and the securities offered hereby,  reference is made to the
registration  statement  filed with the SEC,  including  all  exhibits  thereto.
Annual and semiannual reports of the Fund are mailed to each shareholder.

18.  FINANCIAL STATEMENTS

   
         The Fund's Annual  Report dated  December 31, 1996 is  incorporated  by
reference into this Statement of Additional  Information  and attached hereto in
reliance upon the report of Arthur Andersen LLP, independent public accountants,
as experts in accounting  and  auditing.  A copy of the Fund's Annual Report may
also  be   obtained   without   charge  by  calling   Shareholder   Services  at
1-800-225-6292  or by written  request to the Fund at 60 State  Street,  Boston,
Massachusetts 02109.     





<PAGE>



                                   APPENDIX A


         The three highest  ratings of Moody's for Tax-Exempt  Bonds are Aaa, Aa
and A.  Tax-Exempt  Bonds rated Aaa are judged to be of the "best  quality." The
rating of Aa is assigned to  Tax-Exempt  Bonds which are of "high quality by all
standards,"  but as to  which  margins  of  protection  or other  elements  make
long-term risks appear somewhat larger than Aaa rated Tax-Exempt  Bonds. The Aaa
and Aa rated  Tax-Exempt  Bonds comprise what are generally known as "high grade
bonds."  Tax-Exempt  Bonds which are rated A by Moody's  possess many  favorable
investment  attributes  and are  considered  "upper  medium grade  obligations."
Factors giving  security to principal and interest of A rated  Tax-Exempt  bonds
are  considered   adequate,   but  elements  may  be  present  which  suggest  a
susceptibility to impairment sometime in the future.  Bonds in the A group which
offer the maximum security are rated A-1.

         The three highest ratings of S&P for Tax-Exempt  Bonds are AAA (Prime),
AA (High Grade) and A (Good Grade).  Tax-Exempt Bonds rated AAA are "obligations
of the highest  quality."  The rating of AA is accorded  issues with  investment
characteristics  "only  slightly  less  marked  than those of the prime  quality
issues." The category of A describes the "third  strongest  capacity for payment
of debt service."  Principal and interest payments on bonds in this category are
regarded as safe. It differs from the two higher ratings  because:  with respect
to general obligation bonds, there is some weakness either in the local economic
base, in debt burden,  in the balance between revenues and  expenditures,  or in
quality  of  management.  Under  certain  adverse  circumstances,  any one  such
weakness might impair the ability of the issuer to meet debt obligations at some
future date. With respect to revenue bonds,  debt service  coverage is good, but
not  exceptional.  Stability of the pledged  revenues could show some variations
because of increased  competition  or economic  influences  on  revenues.  Basic
security  provisions,  while  satisfactory,   are  less  stringent.   Management
performance appears adequate. AA and A rated bonds may be modified with a (+) or
(-) when appropriate to provide more detailed indications on credit quality.

         The "other debt  securities"  included in the  definition  of temporary
investments are corporate (as opposed to municipal)  debt obligation  rated AAA,
AA or A by S&P or Aaa, Aa or A by Moody's.  Corporate debt obligations rated AAA
by S&P are "highest  grade  obligations."  Obligations  bearing the rating of AA
also  qualify as "high grade  obligations"  and "in the  majority  of  instances
differ from AAA issues only in small degree." Corporate debt obligations rates A
by S&P are regarded as "upper  medium grade" and have  "considerable  investment
strength,  but are not entirely free from adverse effects of changes in economic
and trade  conditions."  The Moody's  corporate debt ratings of Aaa, Aa and A do
not differ materially from those set forth above for Tax-Exempt Bonds.

         The  commercial  paper ratings of A-1 by S&P and P-1 by Moody's are the
highest  commercial  paper  ratings of the  respective  agencies.  The  issuer's
earnings,  quality of long-term debt, management and industry position are among
the factors considered in assigning such ratings.

         Subsequent to its purchase by the Fund, an issue of Tax-Exempt Bonds or
a temporary  investment may cease to be rated or its rating may be reduced below
the minimum  required  for  purchase by the Fund.  Neither  event  requires  the
elimination of such obligation from the Fund's portfolio,  but PMC will consider
such an event in its  determination  of whether the Fund should continue to hold
such obligation in its portfolio. To the extent that the ratings accorded by S&P
and Moody's for Tax-Exempt Bonds or temporary investments may change as a result
of changes in such organizations,  or changes in their ratings systems, the Fund
will attempt to use  comparable  ratings as  standards  for its  investments  in
Tax-Exempt  Bonds or temporary  investments  in accordance  with the  investment
policies contained herein.


<PAGE>

<TABLE>
<CAPTION>



                                              Pioneer Tax-Free Income Fund A


<S>                 <C>                 <C>            <C>            <C>                 <C>                 <C>

                                                                                     Net Asset Value
                  Initial       Offering Price     Sales Charge    Shares Purchased     Per Share        Initial Net
    Date         Investment                          Included                                            Asset Value

   1/18/77        $10,000          $15.7900           4.50%             633.312           $15.08            $9550


                                          Dividends and Capital Gains Reinvested

                                                     Value of Shares



      Date        From Investment             From Cap. Gains           From Dividends              Total Value
                                                Reinvested                Reinvested
   
    12/31/86              $7,403                   $887                     $8,951                    $17,241
    12/31/87              $6,776                   $812                     $9,384                    $16,972
    12/31/88              $7,074                   $848                    $11,129                    $19,051
    12/31/89              $7,263                   $871                    $12,845                    $20,979
    12/31/90              $7,296                   $884                    $14,352                    $22,532
    12/31/91              $7,593                  $1,302                   $16,451                    $25,346
    12/31/92              $7,650                  $1,800                   $18,108                    $27,558
    12/31/93              $8,031                  $2,534                   $20,571                    $31,136
    12/31/94              $7,119                  $2,254                   $19,778                    $29,151
    12/31/95              $7,828                  $2,719                   $23,511                    $34,058
    12/31/96              $7,574                  $3,188                   $24,512                    $35,274
    



<PAGE>




   
                                              Pioneer Tax-Free Income Fund B
    



     <S>                 <C>            <C>                 <C>            <C>            <C>                 <C>
                                                                                     Net Asset Value
                  Initial       Offering Price     Sales Charge    Shares Purchased     Per Share        Initial Net
    Date         Investment                          Included                                            Asset Value
   4/28/95        $10,000          $11.8100           4.00%            846.740           $11.8100          $10,000


                                          Dividends and Capital Gains Reinvested

                                                     Value of Shares


   
      Date        From Investment      From Cap. Gains     From Dividends        CDSC          Total Value      CDSC Percentage
                                                                                 if Redeemed
    
                                     Reinvested               Reinvested
   
    12/31/95      $10,423             $77                      $294              $400              $10,394             4.00%
    12/31/96      $10,059             $250                     $771              $400              $10,680             4.00%

<PAGE>

                                              Pioneer Tax-Free Income Fund C


     <S>            <C>                 <C>            <C>                 <C>             <C>              <C>

                                                                                     Net Asset Value
                  Initial       Offering Price     Sales Charge    Shares Purchased     Per Share        Initial Net
    Date         Investment                          Included                                            Asset Value
   1/31/96        $10,000          $12.320            1.00%           $ 811.688           $12.32           $10,000


                                          Dividends and Capital Gains Reinvested

                                                     Value of Shares


      Date        From Investment            From Cap. Gains           From Dividends      CDSC        Total Value  CDSC Percentage
                                                                                        if Redeemed
                                                Reinvested               Reinvested
    12/31/96              $9,642                   $163                     $414          $96            $10,123           1.00%
    



</TABLE>


<PAGE>
 COMPARATIVE PERFORMANCE
                               INDEX DESCRIPTIONS

The following securities indices are well-known, unmanaged measures of market
performance. Advertisements and sales literature for the Fund may refer to these
indices or may present comparisons between the performance of the Fund and one
or more of the indices. Other indices may be used, if appropriate. The indices
are not available for direct investment. The data presented is not meant to be
indicative of the performance of the Fund, reflects past performance and does
not guarantee future results.

S&P 500

This index is a readily available, carefully constructed, market value weighted
benchmark of common stock performance. Currently, the S&P Composite Index
includes 500 of the largest stocks (in terms of stock market value) in the
United States; prior to March 1957 it consisted of 90 of the largest stocks.

DOW JONES INDUSTRIAL AVERAGE

This is a total return index based on the performance of 30 blue chip stocks.

U.S. SMALL STOCK INDEX

This index is a market value weighted index of the ninth and tenth deciles of
the New York Stock Exchange (NYSE), plus stocks listed on the American Stock
Exchange (AMEX) and over-the-counter (OTC) with the same or less capitalization
as the upper bound of the NYSE ninth decile.

U.S. INFLATION

The Consumer Price Index for All Urban Consumers (CPI-U), not seasonally
adjusted, is used to measure inflation, which is the rate of change of consumer
goods prices. Unfortunately, the inflation rate as derived by the CPI is not
measured over the same period as the other asset returns. All of the security
returns are measured from one month-end to the next month-end. CPI commodity
prices are collected during the month. Thus, measured inflation rates lag the
other series by about one-half month. Prior to January 1978, the CPI (as
compared with CPI-U) was used. Both inflation measures are constructed by the
U.S. Department of Labor, Bureau of Labor Statistics, Washington, DC.

S&P/BARRA INDEXES

The S&P/BARRA Growth and Value Indexes are constructed by dividing the stocks in
the S&P 500 Index according to price-to-book ratios. The Growth Index contains
stocks with higher price-to-book ratios, and the Value Index contains stocks
with lower price-to-book ratios. Both indexes are market capitalization
weighted.

                                      
<PAGE>
                             COMPARATIVE PERFORMANCE
                               INDEX DESCRIPTIONS


LONG-TERM U.S. GOVERNMENT BONDS

The total returns on long-term government bonds from 1977 to 1991 are
constructed with data from The Wall Street Journal. Over 1926-1976, data are
obtained from the Government bond file at the Center for Research in Security
Prices (CRSP), Graduate School of Business, University of Chicago. Each year, a
one-bond portfolio with a term of approximately 20 years and a reasonably
current coupon was used, and whose returns did not reflect potential tax
benefits, impaired negotiability, or special redemption or call privileges.
Where callable bonds had to be used, the term of the bond was assumed to be a
simple average of the maturity and first call dates minus the current date. The
bond was "held" for the calendar year and returns were computed. Total returns
for 1977-1991 are calculated as the change in the flat price or and-interest
price.

INTERMEDIATE-TERM U.S. GOVERNMENT BONDS

Total returns of the intermediate-term government bonds for 1977-1991 are
calculated from The Wall Street Journal prices, using the change in flat price.
Returns from 1934-1986 are obtained from the CRSP Government Bond File.

Each year, one-bond portfolios are formed, the bond chosen is the shortest
noncallable bond with a maturity not less than 5 years, and this bond is "held"
for the calendar year. Monthly returns are computed. (Bonds with impaired
negotiability or special redemption privileges are omitted, as are partially or
fully tax-exempt bonds starting with 1943.) From 1934-1942, almost all bonds
with maturities near 5 years were partially or full tax-exempt and were selected
using the rules described above. Personal tax rates were generally low in that
period, so that yields on tax-exempt bonds were similar to yields on taxable
bonds. From 1926-1933, there are few bonds suitable for construction of a series
with a 5-year maturity. For this period, five year bond yield estimates are
used.

MSCI

Morgan Stanley Capital International Indices, developed by the Capital
International S.A., are based on share prices of some 1470 companies listed on
the stock exchanges around the world.

Countries in the MSCI EAFE Portfolio are:

Australia; Austria; Belgium; Denmark; Finland; France; Germany; Hong Kong;
Italy; Japan; Netherlands; N. Zealand; Norway; Singapore/Malaysia; Spain;
Sweden; Switzerland; United Kingdom.

   
Countries in the MSCI EMERGING MARKET FREE INDEX are: Argentina, Brazil, Chile,
China, Czech Republic, Colombia, Greece, Hungary, India, Indonesia, Israel,
Jordan, Korea Free (at 50%), Malaysia, Mexico Free, Pakistan, Peru, Philippines
Free, Poland, Portugal, South Africa, Sri Lanka, Taiwan, Thailand, Turkey,
Venezuela Free
    

                                      
<PAGE>
                             COMPARATIVE PERFORMANCE
                               INDEX DESCRIPTIONS

6 MONTH CDs 

Data sources include the Federal Reserve Bulletin and The Wall Street Journal.

LONG-TERM U.S. CORPORATE BONDS

For 1969-1991, corporate bond total returns are represented by the Salomon
Brothers Long-Term High-Grade Corporate Bond Index. Since most large corporate
bond transactions take place over the counter, a major dealer is the natural
source of these data. The index includes nearly all Aaa- and Aa-rated bonds. If
a bond is downgraded during a particular month, its return for the month is
included in the index before removing the bond from future portfolios.

Over 1926-1968 the total returns were calculated by summing the capital
appreciation returns and the income returns. For the period 1946-1968, Ibbotson
and Sinquefield backdated the Salomon Brothers' index, using Salomon Brothers'
monthly yield data with a methodology similar to that used by Salomon for
1969-1991. Capital appreciation returns were calculated from yields assuming (at
the beginning of each monthly holding period) a 20-year maturity, a bond price
equal to par, and a coupon equal to the beginning-of-period yield. For the
period 1926-1945, the Standard and Poor's monthly High-Grade Corporate Composite
yield data were used, assuming a 4 percent coupon and a 20-year maturity. The
conventional present-value formula for bond price for the beginning and
end-of-month prices was used. (This formula is presented in Ross, Stephen A.,
and Randolph W. Westerfield, Corporate Finance, Times Mirror/Mosby, St. Louis,
1990, p. 97 ["Level-Coupon Bonds"].) The monthly income return was assumed to be
one-twelfth the coupon.

U.S. (30 DAY) TREASURY BILLS

For the U.S. Treasury bill index, data from The Wall Street Journal are used for
1977-1991; the CRSP U.S. Government Bond File is the source until 1976. Each
month a one-bill portfolio containing the shortest-term bill having not less
than one month to maturity is constructed. (The bill's original term to maturity
is not relevant.) To measure holding period returns for the one-bill portfolio,
the bill is priced as of the last trading day of the previous month-end and as
of the last trading day of the current month.

NAREIT-EQUITY INDEX

All of the data is based upon the last closing price of the month for all
tax-qualified REITs listed on the NYSE, AMSE and the NASDAQ. The data is
market-value-weighted. Prior to 1987 REITs were added to the index the January
following their listing. Since 1987 Newly formed or listed REITs are added to
the total shares outstanding figure in the month that the shares are issued.
Only common shares issued by the REIT are included in the index. The total
return calculation is based upon the weighing at the beginning of the period.
Only those REITs listed for the entire period are


                                      
<PAGE>
                             COMPARATIVE PERFORMANCE
                               INDEX DESCRIPTIONS

used in the total return calculation. Dividends are included in the month based
upon their payment date. There is no smoothing of income. Liquidating dividends,
whether full or partial, are treated as income.

RUSSELL 2000 SMALL STOCK INDEX

Index of the 2,000 smallest stocks in the Russell 3000 Index (TM); the smallest
company has a market capitalization of approximately $13 million. The Russell
3000 is comprised of the 3,000 largest US companies as determined by market
capitalization representing approximately 98% of the US equity market. The
largest company in the index has a market capitalization of $67 billion. The
Russell Indexes (TM) are reconstituted annually as of June 1st, based on May 31
market capitalization rankings.

WILSHIRE REAL ESTATE SECURITIES INDEX

The Wilshire Real Estate Securities Index is a market capitalization-weighted
index which measures the performance of more than 85 securities.

The index contains performance data on five major categories of property;
office, retail, industrial, apartment and miscellaneous. Additionally, the Index
has real estate portfolio encumbered by 16% third party mortgages. The companies
in the WRESEC are 79% equity and hybrid REIT's and 21% real estate operating
companies. The capitalization is 47% NYSE, 33% AMEX and 20% OTC."

STANDARD & POOR'S MIDCAP 400 INDEX

The Standard and Poor's MidCap 400 Index is a market-value-weighted index. The
performance data for the MidCap 400 Index were calculated by taking the stocks
presently in the MidCap 400 Index and tracking them backwards in time as long as
there were prices reported. No attempt was made to determine what stocks "might
have been" in the MidCap 400 Index five or ten years ago had it existed.
Dividends are reinvested on a monthly basis prior to June 30, 1991, and are
reinvested daily thereafter.

The S&P MidCap 400 Index and the S&P 500 together represent approximately 85% of
the total market capitalization of stocks traded in the United States.

   
LIPPER BALANCED FUNDS INDEX

Equally-weighted performance indices, adjusted for capital gains distributions
and income dividends of approximately 30 of the largest funds with a primary
objective of conserving principal by maintaining at all times a balanced
portfolio of stocks and bonds. Typically, the stock/bond ratio ranges around
60%/40%.
    

                                      
<PAGE>
                             COMPARATIVE PERFORMANCE
                               INDEX DESCRIPTIONS

BANK SAVINGS ACCOUNT

Data sources include the U.S. League of Savings Institutions Sourcebook; average
annual yield on savings deposits in FSLIC [FDIC] insured savings institutions
for the years 1963-1987 and The Wall Street Journal for the years 1988-1994.






Source:           Ibbotson Associates


<PAGE>

                  PERFORMANCE STATISTICS - TOTAL RETURN PERCENT


          S&P 500       Dow      U.S. Small                  S&P/     S&P/
                       Jones       Stock         U.S.       BARRA    BARRA
                    Industrials    Index      Inflation    Growth    Value
--------------------------------------------------------------------------------

   
Dec 1928   43.61       55.38       39.69       -0.97         N/A      N/A
Dec 1929   -8.42      -13.64      -51.36        0.20         N/A      N/A
Dec 1930  -24.90      -30.22      -38.15       -6.03         N/A      N/A
Dec 1931  -43.34      -49.03      -49.75       -9.52         N/A      N/A
Dec 1932   -8.19      -16.88       -5.39      -10.30         N/A      N/A
Dec 1933   53.99       73.71      142.87        0.51         N/A      N/A
Dec 1934   -1.44        8.07       24.22        2.03         N/A      N/A
Dec 1935   47.67       43.77       40.19        2.99         N/A      N/A
Dec 1936   33.92       30.23       64.80        1.21         N/A      N/A
Dec 1937  -35.03      -28.88      -58.01        3.10         N/A      N/A
Dec 1938   31.12       33.16       32.80       -2.78         N/A      N/A
Dec 1939   -0.41        1.31        0.35       -0.48         N/A      N/A
Dec 1940   -9.78       -7.96       -5.16        0.96         N/A      N/A
Dec 1941  -11.59       -9.88       -9.00        9.72         N/A      N/A
Dec 1942   20.34       14.12       44.51        9.29         N/A      N/A
Dec 1943   25.90       19.06       88.37        3.16         N/A      N/A
Dec 1944   19.75       17.19       53.72        2.11         N/A      N/A
Dec 1945   36.44       31.60       73.61        2.25         N/A      N/A
Dec 1946   -8.07       -4.40      -11.63       18.16         N/A      N/A
Dec 1947    5.71        7.61        0.92        9.01         N/A      N/A
Dec 1948    5.50        4.27       -2.11        2.71         N/A      N/A
Dec 1949   18.79       20.92       19.75       -1.80         N/A      N/A
Dec 1950   31.71       26.40       38.75        5.79         N/A      N/A
Dec 1951   24.02       21.77        7.80        5.87         N/A      N/A
Dec 1952   18.37       14.58        3.03        0.88         N/A      N/A
Dec 1953   -0.99        2.02       -6.49        0.62         N/A      N/A
Dec 1954   52.62       51.25       60.58       -0.50         N/A      N/A
Dec 1955   31.56       26.58       20.44        0.37         N/A      N/A
Dec 1956    6.56        7.10        4.28        2.86         N/A      N/A
Dec 1957  -10.78       -8.63      -14.57        3.02         N/A      N/A
Dec 1958   43.36       39.31       64.89        1.76         N/A      N/A
Dec 1959   11.96       20.21       16.40        1.50         N/A      N/A
Dec 1960    0.47       -6.14       -3.29        1.48         N/A      N/A
Dec 1961   26.89       22.60       32.09        0.67         N/A      N/A
Dec 1962   -8.73       -7.43      -11.90        1.22         N/A      N/A
Dec 1963   22.80       20.83       23.57        1.65         N/A      N/A
Dec 1964   16.48       18.85       23.52        1.19         N/A      N/A
Dec 1965   12.45       14.39       41.75        1.92         N/A      N/A
Dec 1966  -10.06      -15.78       -7.01        3.35         N/A      N/A
Dec 1967   23.98       19.16       83.57        3.04         N/A      N/A
Dec 1968   11.06        7.93       35.97        4.72         N/A      N/A
    


<PAGE>

                  PERFORMANCE STATISTICS - TOTAL RETURN PERCENT


          S&P 500       Dow      U.S. Small                  S&P/     S&P/
                       Jones       Stock         U.S.       BARRA    BARRA
                    Industrials    Index      Inflation    Growth    Value
--------------------------------------------------------------------------------

   
Dec 1969   -8.50      -11.78      -25.05        6.11        N/A      N/A
Dec 1970    4.01        9.21      -17.43        5.49        N/A      N/A
Dec 1971   14.31        9.83       16.50        3.36        N/A      N/A
Dec 1972   18.98       18.48        4.43        3.41        N/A      N/A
Dec 1973  -14.66      -13.28      -30.90        8.80        N/A      N/A
Dec 1974  -26.47      -23.58      -19.95       12.20        N/A      N/A
Dec 1975   37.20       44.75       52.82        7.01       31.72    43.38
Dec 1976   23.84       22.82       57.38        4.81       13.84    34.93
Dec 1977   -7.18      -12.84       25.38        6.77      -11.82    -2.57
Dec 1978    6.56        2.79       23.46        9.03        6.78     6.16
Dec 1979   18.44       10.55       43.46       13.31       15.72    21.16
Dec 1980   32.42       22.17       39.88       12.40       39.40    23.59
Dec 1981   -4.91       -3.57       13.88        8.94       -9.81     0.02
Dec 1982   21.41       27.11       28.01        3.87       22.03    21.04
Dec 1983   22.51       25.97       39.67        3.80       16.24    28.89
Dec 1984    6.27        1.31       -6.67        3.95        2.33    10.52
Dec 1985   32.16       33.55       24.66        3.77       33.31    29.68
Dec 1986   18.47       27.10        6.85        1.13       14.50    21.67
Dec 1987    5.23        5.48       -9.30        4.41        6.50     3.68
Dec 1988   16.81       16.14       22.87        4.42       11.95    21.67
Dec 1989   31.49       32.19       10.18        4.65       36.40    26.13
Dec 1990   -3.17       -0.56      -21.56        6.11        0.20    -6.85
Dec 1991   30.55       24.19       44.63        3.06       38.37    22.56
Dec 1992    7.67        7.41       23.35        2.90        5.07    10.53
Dec 1993    9.99       16.94       20.98        2.75        1.68    18.60
Dec 1994    1.31        5.06        3.11        2.78        3.13    -0.64
Dec 1995   37.43       36.84       34.46        2.74       38.13    36.99
Dec 1996   23.07       28.84       17.62        3.58       23.96    21.99
    

<PAGE>

                  PERFORMANCE STATISTICS - TOTAL RETURN PERCENT



                         Intermediate      MSCI               Long-
          Long-Term       -Term U.S.       EAFE        6     Term U.S.    U.S.
          U.S. Gov't      Government     - Net of    MONTH   Corporate  (30 Day)
            Bonds           Bonds          Taxes      CDs      Bonds    T- Bill
--------------------------------------------------------------------------------

   
Dec 1925     N/A              N/A           N/A       N/A      N/A      N/A
Dec 1926     7.77             5.38          N/A       N/A      7.37     3.27
Dec 1927     8.93             4.52          N/A       N/A      7.44     3.12
Dec 1928     0.1              0.92          N/A       N/A      2.84     3.56
Dec 1929     3.42             6.01          N/A       N/A      3.27     4.75
Dec 1930     4.66             6.72          N/A       N/A      7.98     2.41
Dec 1931    -5.31            -2.32          N/A       N/A      -1.85    1.07
Dec 1932    16.84             8.81          N/A       N/A      10.82    0.96
Dec 1933    -0.07             1.83          N/A       N/A      10.38    0.30
Dec 1934    10.03             9.00          N/A       N/A      13.84    0.16
Dec 1935     4.98             7.01          N/A       N/A      9.61     0.17
Dec 1936     7.52             3.06          N/A       N/A      6.74     0.18
Dec 1937     0.23             1.56          N/A       N/A      2.75     0.31
Dec 1938     5.53             6.23          N/A       N/A      6.13    -0.02
Dec 1939     5.94             4.52          N/A       N/A      3.97     0.02
Dec 1940     6.09             2.96          N/A       N/A      3.39     0.00
Dec 1941     0.93             0.50          N/A       N/A      2.73     0.06
Dec 1942     3.22             1.94          N/A       N/A      2.60     0.27
Dec 1943     2.08             2.81          N/A       N/A      2.83     0.35
Dec 1944     2.81             1.80          N/A       N/A      4.73     0.33
Dec 1945    10.73             2.22          N/A       N/A      4.08     0.33
Dec 1946    -0.10             1.00          N/A       N/A      1.72     0.35
Dec 1947    -2.62             0.91          N/A       N/A     -2.34     0.50
Dec 1948     3.40             1.85          N/A       N/A      4.14     0.81
Dec 1949     6.45             2.32          N/A       N/A      3.31     1.10
Dec 1950     0.06             0.70          N/A       N/A      2.12     1.20
Dec 1951    -3.93             0.36          N/A       N/A     -2.69     1.49
Dec 1952     1.16             1.63          N/A       N/A      3.52     1.66
Dec 1953     3.64             3.23          N/A       N/A      3.41     1.82
Dec 1954     7.19             2.68          N/A       N/A      5.39     0.86
Dec 1955    -1.29            -0.65          N/A       N/A      0.48     1.57
Dec 1956    -5.59            -0.42          N/A       N/A     -6.81     2.46
Dec 1957     7.46             7.84          N/A       N/A      8.71     3.14
Dec 1958    -6.09            -1.29          N/A       N/A     -2.22     1.54
Dec 1959    -2.26            -0.39          N/A       N/A     -0.97     2.95
Dec 1960    13.78            11.76          N/A       N/A      9.07     2.66
Dec 1961     0.97             1.85          N/A       N/A      4.82     2.13
Dec 1962     6.89             5.56          N/A       N/A      7.95     2.73
Dec 1963     1.21             1.64          N/A       N/A      2.19     3.12
Dec 1964     3.51             4.04          N/A      4.18      4.77     3.54
Dec 1965     0.71             1.02          N/A      4.68     -0.46     3.93
    


<PAGE>

                  PERFORMANCE STATISTICS - TOTAL RETURN PERCENT


                         Intermediate      MSCI               Long-
          Long-Term       -Term U.S.       EAFE        6     Term U.S.    U.S.
          U.S. Gov't      Government     - Net of    MONTH   Corporate  (30 Day)
            Bonds           Bonds          Taxes      CDs      Bonds    T- Bill
--------------------------------------------------------------------------------

   
Dec 1966     3.65           4.69            N/A       5.75     0.20       4.76
Dec 1967    -9.18           1.01            N/A       5.48    -4.95       4.21
Dec 1968    -0.26           4.54            N/A       6.44     2.57       5.21
Dec 1969    -5.07          -0.74            N/A       8.71    -8.09       6.58
Dec 1970    12.11          16.86          -11.66      7.06    18.37       6.52
Dec 1971    13.23           8.72           29.59      5.36    11.01       4.39
Dec 1972     5.69           5.16           36.35      5.38     7.26       3.84
Dec 1973    -1.11           4.61          -14.92      8.60     1.14       6.93
Dec 1974     4.35           5.69          -23.16     10.20    -3.06       8.00
Dec 1975     9.20           7.83           35.39      6.51    14.64       5.80
Dec 1976    16.75          12.87            2.54      5.22    18.65       5.08
Dec 1977    -0.69           1.41           18.06      6.12     1.71       5.12
Dec 1978    -1.18           3.49           32.62     10.21    -0.07       7.18
Dec 1979    -1.23           4.09            4.75     11.90    -4.18      10.38
Dec 1980    -3.95           3.91           22.58     12.33    -2.76      11.24
Dec 1981     1.86           9.45           -2.28     15.50    -1.24      14.71
Dec 1982    40.36          29.1            -1.86     12.18    42.56      10.54
Dec 1983     0.65           7.41           23.69      9.65     6.26       8.80
Dec 1984    15.48          14.02            7.38     10.65    16.86       9.85
Dec 1985    30.97          20.33           56.16      7.82    30.09       7.72
Dec 1986    24.53          15.14           69.44      6.30    19.85       6.16
Dec 1987    -2.71           2.90           24.63      6.58    -0.27       5.47
Dec 1988     9.67           6.10           28.27      8.15    10.70       6.35
Dec 1989    18.11          13.29           10.54      8.27    16.23       8.37
Dec 1990     6.18           9.73          -23.45      7.85     6.78       7.81
Dec 1991    19.3           15.46           12.13      4.95    19.89       5.60
Dec 1992     8.05           7.19          -12.17      3.27     9.39       3.51
Dec 1993    18.24          11.24           32.56      2.88    13.19       2.90
Dec 1994    -7.77          -5.14            7.78      5.40    -5.76       3.90
Dec 1995    31.67          16.8            11.21      5.21    26.39       5.60
Dec 1996    -0.93           2.10            6.05      5.21     1.40       5.21
    


<PAGE>

<TABLE>
<CAPTION>
                             RUSSELL                                      LIPPER      MSCI EMERGING
                              2000       WILSHIRE REAL    S&P MIDCAP     BALANCED     MARKETS FREE         BANK
              NAREIT-EQUITY   INDEX         ESTATE           400           FUND           INDEX       SAVINGS ACCOUNT
                                          SECURITIES        INDEX          INDEX
-----------------------------------------------------------------------------------------------------------------------
<S>               <C>          <C>           <C>             <C>            <C>            <C>             <C>                    
   
Dec 1925          N/A          N/A           N/A             N/A            N/A            N/A              N/A
Dec 1926          N/A          N/A           N/A             N/A            N/A            N/A              N/A
Dec 1927          N/A          N/A           N/A             N/A            N/A            N/A              N/A
Dec 1928          N/A          N/A           N/A             N/A            N/A            N/A              N/A
Dec 1929          N/A          N/A           N/A             N/A            N/A            N/A              N/A
Dec 1930          N/A          N/A           N/A             N/A            N/A            N/A             5.30
Dec 1931          N/A          N/A           N/A             N/A            N/A            N/A             5.10
Dec 1932          N/A          N/A           N/A             N/A            N/A            N/A             4.10
Dec 1933          N/A          N/A           N/A             N/A            N/A            N/A             3.40
Dec 1934          N/A          N/A           N/A             N/A            N/A            N/A             3.50
Dec 1935          N/A          N/A           N/A             N/A            N/A            N/A             3.10
Dec 1936          N/A          N/A           N/A             N/A            N/A            N/A             3.20
Dec 1937          N/A          N/A           N/A             N/A            N/A            N/A             3.50
Dec 1938          N/A          N/A           N/A             N/A            N/A            N/A             3.50
Dec 1939          N/A          N/A           N/A             N/A            N/A            N/A             3.40
Dec 1940          N/A          N/A           N/A             N/A            N/A            N/A             3.30
Dec 1941          N/A          N/A           N/A             N/A            N/A            N/A             3.10
Dec 1942          N/A          N/A           N/A             N/A            N/A            N/A             3.00
Dec 1943          N/A          N/A           N/A             N/A            N/A            N/A             2.90
Dec 1944          N/A          N/A           N/A             N/A            N/A            N/A             2.80
Dec 1945          N/A          N/A           N/A             N/A            N/A            N/A             2.50
Dec 1946          N/A          N/A           N/A             N/A            N/A            N/A             2.20
Dec 1947          N/A          N/A           N/A             N/A            N/A            N/A             2.30
Dec 1948          N/A          N/A           N/A             N/A            N/A            N/A             2.30
Dec 1949          N/A          N/A           N/A             N/A            N/A            N/A             2.40
Dec 1950          N/A          N/A           N/A             N/A            N/A            N/A             2.50
Dec 1951          N/A          N/A           N/A             N/A            N/A            N/A             2.60
Dec 1952          N/A          N/A           N/A             N/A            N/A            N/A             2.70
Dec 1953          N/A          N/A           N/A             N/A            N/A            N/A             2.80
Dec 1954          N/A          N/A           N/A             N/A            N/A            N/A             2.90
Dec 1955          N/A          N/A           N/A             N/A            N/A            N/A             2.90
Dec 1956          N/A          N/A           N/A             N/A            N/A            N/A             3.00
Dec 1957          N/A          N/A           N/A             N/A            N/A            N/A             3.30
Dec 1958          N/A          N/A           N/A             N/A            N/A            N/A             3.38
Dec 1959          N/A          N/A           N/A             N/A            N/A            N/A             3.53
Dec 1960          N/A          N/A           N/A             N/A           5.77            N/A             3.86
Dec 1961          N/A          N/A           N/A             N/A           20.59           N/A             3.90
Dec 1962          N/A          N/A           N/A             N/A           -6.80           N/A             4.08
Dec 1963          N/A          N/A           N/A             N/A           13.10           N/A             4.17
Dec 1964          N/A          N/A           N/A             N/A           12.36           N/A             4.19
Dec 1965          N/A          N/A           N/A             N/A           9.80            N/A             4.23
Dec 1966          N/A          N/A           N/A             N/A           -5.86           N/A             4.45
Dec 1967          N/A          N/A           N/A             N/A           15.09           N/A             4.67
Dec 1968          N/A          N/A           N/A             N/A           13.97           N/A             4.68
Dec 1969          N/A          N/A           N/A             N/A           -9.01           N/A             4.80
Dec 1970          N/A          N/A           N/A             N/A           5.62            N/A             5.14
Dec 1971          N/A          N/A           N/A             N/A           13.90           N/A             5.30
    


<PAGE>



                             RUSSELL                                      LIPPER      MSCI EMERGING
                              2000       WILSHIRE REAL    S&P MIDCAP     BALANCED     MARKETS FREE         BANK
              NAREIT-EQUITY   INDEX         ESTATE           400           FUND           INDEX       SAVINGS ACCOUNT
                                          SECURITIES        INDEX          INDEX
-----------------------------------------------------------------------------------------------------------------------
<S>               <C>          <C>           <C>             <C>            <C>            <C>             <C>                  
   
Dec 1972         8.01          N/A           N/A             N/A           11.13           N/A             5.37
Dec 1973        -15.52         N/A           N/A             N/A          -12.24           N/A             5.51
Dec 1974        -21.40         N/A           N/A             N/A          -18.71           N/A             5.96
Dec 1975         19.30         N/A           N/A             N/A           27.10           N/A             6.21
Dec 1976         47.59         N/A           N/A             N/A           26.03           N/A             6.23
Dec 1977         22.42         N/A           N/A             N/A           -0.72           N/A             6.39
Dec 1978         10.34         N/A          13.04            N/A           4.80            N/A             6.56
Dec 1979         35.86        43.09         70.81            N/A           14.67           N/A             7.29
Dec 1980         24.37        38.58         22.08            N/A           19.70           N/A             8.78
Dec 1981         6.00         2.03           7.18            N/A           1.86            N/A             10.71
Dec 1982         21.60        24.95         24.47           22.68          30.63           N/A             11.19
Dec 1983         30.64        29.13         27.61           26.10          17.44           N/A             9.71
Dec 1984         20.93        -7.30         20.64           1.18           7.46            N/A             9.92
Dec 1985         19.10        31.05         22.20           35.58          29.83           N/A             9.02
Dec 1986         19.16        5.68          20.30           16.21          18.43           N/A             7.84
Dec 1987         -3.64        -8.77         -7.86           -2.03          4.13            N/A             6.92
Dec 1988         13.49        24.89         24.18           20.87          11.18          40.43            7.20
Dec 1989         8.84         16.24          2.37           35.54          19.70          64.96            7.91
Dec 1990        -15.35       -19.51         -33.46          -5.12          0.66           10.55            7.80
Dec 1991         35.70        46.05         20.03           50.10          25.83          59.91            4.61
Dec 1992         14.59        18.41          7.36           11.91          7.46           11.40            2.89
Dec 1993         19.65        18.91         15.24           13.96          11.95          74.83            2.73
Dec 1994         3.17         -1.82          1.64           -3.57          -2.05          7.32             4.96
Dec 1995         15.27        28.44         13.65           30.94          24.89          5.21             5.24
Dec 1996         35.26        16.53         36.87           19.20          13.01          6.03             4.95
    

</TABLE>



Source:  Lipper


<PAGE>

                                   APPENDIX C


                         ADDITIONAL PIONEER INFORMATION


         The Pioneer group of mutual funds was established in 1928 with the
creation of Pioneer Fund. Pioneer is one of the oldest and most experienced
money managers in the United States.

   
         As of December 31, 1996, PMC employed a professional investment staff
of 53, with a combined average of twelve years' experience in the financial
services industry.

         Total assets of all Pioneer mutual funds at December 31, 1996, were
approximately $15.8 billion representing 1,086,554 shareholder accounts, 722,661
non-retirement accounts and 363,893 retirement accounts.
    

<PAGE>


                               



                          PIONEER TAX-FREE INCOME FUND

                                     PART C

                                OTHER INFORMATION

   
Item 24. Financial Statements and Exhibits


  (a)      Financial Statements:

  The financial  highlights of the  Registrant  for the
  fiscal year ended  December  31, 1996 are included in
  Part  A  of  the   Registration   Statement  and  the
  financial    statements   of   the   Registrant   are
  incorporated   by  reference   into  Part  B  of  the
  Registration Statement from the 1996 Annual Report to
  Shareholders  for the year ended  December  31,  1996
  (filed  electronically  on  February 25, 1997 file no.
  2-57653; (accession number 0000202679-97-000003).

  (b)          Exhibits:

  (1)          Agreement and Declaration of Trust.*

  (1)(a)        Establishment and Designation of Class B Shares.*

  (1)(b)        Establishment and Designation of Class C Shares.+

  (2)           By-Laws.*

  (3)           Inapplicable.

  (4)           Inapplicable.

  (5)           Management Contract with Pioneering
                Management Corporation.*

  (6)           Underwriting Agreement with Pioneer
                Funds Distributor, Inc.*

  (7)           Inapplicable.

  (8)           Custodian Agreement.*

  (9)           Investment Company Service Agreement with Pioneering 
                Services Corporation.*

  (10)          Inapplicable.

  (11)          Consent of Independent Public Accountants
                (Arthur Andersen LLP).

  (12)          Inapplicable.

  (13)          Understanding - Incorporated herein by
                reference to Post-effective Amendment No. 8 filed March
                18, 1980.

  (14)          Inapplicable.

  (15)(a)      Class A Plan of Distribution.*

    (b)        Class B Plan of Distribution.*

    (c)        Class C Plan of Distribution.+

 (16)          Inapplicable.

 (17)          Financial Data Schedule.

 (18)          Multiple Class Plan Pursuant to Rule 18f-3.+

--------------


        *  Incorporated  by  reference  from  the  Registrant's   Post-Effective
        Amendment No. 34 to the Registration  Statement as filed  electronically
        with the Securities and Exchange Commission on April 26, 1995 (accession
        number 0000202679-95-000010).

        +  Incorporated  by  reference  from  the  Registrant's   Post-Effective
        Amendment No. 35 to the Registration  Statement as filed  electronically
        with the Securities and Exchange  Commission on April 26, 1996  
       (accession number 0000202679-96-000011).
      

<PAGE>



Item 25. Persons Controlled By or Under Common Control With Registrant


                                                      Percent     State/Country
                                                        of               of
         Company                          Owned By    Shares      Incorporation


Pioneering Management Corp. (PMC)             PGI     100%          DE
Pioneering Services Corp. (PSC)               PGI     100%          MA
Pioneer Capital Corp. (PCC)                   PGI     100%          MA
Pioneer Fonds Marketing GmbH (GmbH)           PGI     100%          MA
Pioneer SBIC Corp. (SBIC)                     PGI     100%          MA
Pioneer Associates, Inc. (PAI)                PGI     100%          MA
Pioneer International Corp. (Pint)            PGI     100%          MA
Pioneer Plans Corp. (PPC)                     PGI     100%          MA
Pioneer Goldfields Ltd (PGL)                  PGI     100%          MA
Pioneer Investments Corp. (PIC)               PGI     100%          MA
Pioneer Metals and Technology, Inc. (PMT)     PGI     100%          DE
Pioneer First Polish Trust Fund
  Joint Stock Co. (First Polish)              PGI     100%      Poland
Teberebie Goldfields Ltd. (TGL)               PGI      90%       Ghana
Pioneer Funds Distributor, Inc. (PFD)         PMC     100%          MA
SBIC's outstanding capital stock              PCC     100%          MA

THE FUNDS:  All are parties to management contracts with PMC.

                                      BUSINESS
        FUND                          TRUST

Pioneer International Growth Fund         MA
Pioneer Europe Fund                       MA
Pioneer World Equity Fund                 DE
Pioneer Emerging Markets Fund             DE
Pioneer India Fund                        DE
Pioneer Mid-Cap Fund                      DE
Pioneer Growth Shares                     DE
Pioneer Growth Trust                      MA
Pioneer Micro-Cap Fund                    DE
Pioneer Fund                              DE
Pioneer II                                DE
Pioneer Real Estate Shares                DE
Pioneer Short-Term Income Fund            MA
Pioneer America Income Trust              MA
Pioneer Bond Fund                         MA
Pioneer Balanced Fund                     DE
Pioneer Intermediate Tax-Free Fund        MA
Pioneer Tax-Free Income Fund              DE
Pioneer Money Market Trust                DE
Pioneer Variable Contracts Trust          DE
Pioneer Interest Shares                   DE

OTHER:

 . SBIC is the sole general partner of Pioneer  Ventures Limited  Partnership,  a
Massachusetts limited partnership.  Kothari Pioneer AMC Ltd. (Kothari Pioneer)
(Indian  Corp.),  is a joint venture  between PMC and Investment  Trust of India
Ltd.  (ITI)  (Indian  Corp.)  . ITI  and  PMC own  approximately  54%  and  45%,
respectively, of the total equity capital of Kothari Pioneer.

                              JOHN F. COGAN, JR.

Owns approximately 14% of the outstanding shares of PGI.

    
                                                  TRUSTEE/
         ENTITY            CHAIRMAN  PRESIDENT   DIRECTOR    OTHER

Pioneer Family
  of Mutual Funds               X        X        X

PGL                             X        X        X

PGI                             X        X        X

PPC                                      X        X

PIC                                      X        X

Pintl                                    X        X

PMT                                      X        X

PCC                                               X

PSC                                               X

PMC                            X                  X

PFD                            X                  X

TGL                            X                  X

First Polish                   X                 Member of
                                                 Supervisory
                                                 Board

Hale and Dorr LLP                                Partner

GmbH                                             Chairman of Supervisory
                                                 Board



   
Item 26. Number of Holders of Securities


                                                       Number of Record Holders
         Title of Class                                as of March 31, 1997
         --------------                               ---------------------

         Class A Shares                                                13,692

         Class B Shares                                                   141

         Class C Shares                                                     20
    

Item 27. Indemnification

         Except for the  Agreement and  Declaration  of Trust  establishing  the
Registrant as a Trust under Delaware law,  there is no contract,  arrangement or
statute under which any trustee,  officer,  underwriter or affiliated  person of
the Registrant is insured or indemnified. The Agreement and Declaration of Trust
provides that no Trustee or officer will be indemnified against any liability to
which the  Registrant  would  otherwise  be subject by reason of or for  willful
misfeasance,  bad faith, gross negligence or reckless disregard of such person's
duties.

         Insofar as  indemnification  for liability arising under the Securities
Act of 1933, as amended (the "Act"), may be available to directors, officers and
controlling persons of the Registrant pursuant to the foregoing  provisions,  or
otherwise, the Registrant has been advised that in the opinion of the Securities
and  Exchange  Commission  such  indemnification  is  against  public  policy as
expressed in the Act and is, therefore, unenforceable. In the event that a claim
for  indemnification  against  such  liabilities  (other than the payment of the
Registrant of expenses  incurred or paid by a director,  officer or  controlling
person of the  Registrant  in the  successful  defense  of any  action,  suit or
proceeding)  is  asserted by such  director,  officer or  controlling  person in
connection with the securities being registered,  the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling precedent,
submit  to a  court  of  appropriate  jurisdiction  the  question  whether  such
indemnification  by it is against public policy as expressed in the Act and will
be governed by the final adjudication of such issue.

Item 28. Business and Other Connections of Investment Adviser

         All of the  information  required by this item is set forth in the Form
ADV, as amended, of Pioneering Management Corporation. The following sections of
such Form ADV are incorporated herein by reference:

         (a)      Items 1 and 2 of Part 2;

         (b)      Section IV, Business Background, of
                  each Schedule D.

Item 29. Principal Underwriter

                  (a)      See Item 25 above.

                  (b)      Directors and Officers of PFD:

                    Positions and Offices    Positions and Offices

Name                   with Underwriter         with Registrant
----                   ----------------         ---------------

John F. Cogan, Jr.     Director and Chairman     Chairman of the Board,
                                                 President and Trustee

Robert L. Butler       Director and President    None



David D. Tripple       Director                  Executive Vice President and
                                                 Trustee


Steven M. Graziano     Senior                     None
                       Vice President

Stephen W. Long        Senior                     None
                       Vice President

John W. Drachman       Vice President             None

Barry G. Knight        Vice President             None

William A. Misata      Vice President             None

Anne W. Patenaude      Vice President             None

Elizabeth B. Bennett   Vice President             None

Gail A. Smyth          Vice President             None

Constance D. Spiros    Vice President             None

Marcy L. Supovitz      Vice President             None

Mary Kleeman           Vice President             None

Steven R. Berke        Assistant                  None
                       Vice President

Mary Sue Hoban         Assistant                  None
                       Vice President

William H. Keough      Treasurer                  Treasurer

Roy P. Rossi           Assistant Treasurer        None

Joseph P. Barri        Clerk                      Secretary

Robert P. Nault        Assistant Clerk            Assistant Secretary



                  (c)      Not applicable.



<PAGE>



Item 30. Location of Accounts and Records

                  The accounts and records are  maintained  at the  Registrant's
office at 60 State Street, Boston, Massachusetts; contact the Treasurer.


Item 31. Management Services

                  The  Registrant  is  not a  party  to  any  management-related
service  contract,  except as described in the  Prospectus  and the Statement of
Additional Information.


Item 32. Undertakings

                  (a)      Not Applicable.

                  (b)      Not Applicable.

                  (c) The  Registrant  undertakes  to  deliver,  or  cause to be
                  delivered  with the  Prospectus,  to each  person  to whom the
                  Prospectus is sent or given a copy of the Registrant's  report
                  to  shareholders   furnished   pursuant  to  and  meeting  the
                  requirements of Rule 30d-1 under the Investment Company Act of
                  1940 from which the specified  information is  incorporated by
                  reference,  unless such person  currently holds  securities of
                  the  Registrant  and  otherwise  has  received  a copy of such
                  report,  in  which  case  the  Registrant  shall  state in the
                  Prospectus  that it will furnish,  without  charge,  a copy of
                  such report on request,  and the name,  address and  telephone
                  number  of the  person  to  whom  such  a  request  should  be
                  directed.


<PAGE>


                                   SIGNATURES


   
         Pursuant  to the  requirements  of the  Securities  Act of 1933 and the
Investment  Company Act of 1940, the Registrant  certifies that it meets all the
requirements  for  effectiveness  of this  Post-Effective  Amendment No. 36 (the
"Amendment")  to the  Registration  Statement  pursuant to Rule 485(b) under the
Securities  Act of 1933 and has duly caused this  Amendment  to be signed on its
behalf by the undersigned,  thereunto duly authorized, in the City of Boston and
The Commonwealth of Massachusetts, on the 30th day of April, 1997.
    

                                                    PIONEER TAX-FREE INCOME FUND


                                                           /s/John F. Cogan, Jr.
                                                              John F. Cogan, Jr.
                                                                        Chairman


         Pursuant  to the  requirements  of the  Securities  Act of  1933,  this
Amendment has been signed below by the following  persons in the  capacities and
on the dates indicated:





         Title and Signature                               Date

Principal Executive Officer:                                  )
                                                              )
                                                              )
/s/ John F. Cogan, Jr.*                                       )
--------------------------------------------
John F. Cogan, Jr., President                                 )
                                                              )
                                                              )
Principal Financial and                                       )
Accounting Officer:                                           )
                                                              )
                                                              )
William H. Keough*                                            )
William H. Keough, Treasurer                                  )
                                                              )
                                                              )
A Majority of the Board of Trustees:                          )
                                                              )
/s/ John F. Cogan, Jr.*                                       )
John F. Cogan, Jr.                                            )
                                                              )
                                                              )
Richard H. Egdahl, M.D.*                                      )
Richard H. Egdahl, M.D.                                       )
                                                              )
                                                              )
Margaret B. W. Graham*                                        )
Margaret B. W. Graham                                         )
                                                              )
                                                              )
John W. Kendrick*                                             )
John W. Kendrick                                              )
                                                              )
                                                              )
Marguerite A. Piret*                                          )
Marguerite A. Piret                                           )
                                                              )
                                                              )
David D. Tripple*                                             )
David D. Tripple                                              )
                                                              )
                                                              )
Stephen K. West*                                              )
Stephen K. West                                               )
                                                              )
                                                              )
John Winthrop*                                                )
John Winthrop                                                 )

---------


   
*By      /s/John F. Cogan, Jr.                                April 30, 1997
         ---------------------------
         John F. Cogan, Jr.
         Attorney-in-fact
    




<PAGE>


                                  Exhibit Index

Exhibit   
Number   Document Title

(11)     Consent of Independent Public Accountants
         (Arthur Andersen LLP).

(17)     Financial Data Schedule.